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Does enterprise risk management influence market value – A long-term perspective

Author

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  • Danijela Miloš Sprčić

    (Faculty of Economics and Business, University of Zagreb)

  • Marina Mešin Žagar

    (Faculty of Economics and Business, University of Zagreb
    USC Marshall School of Business, University of Southern California)

  • Željko Šević

    (Faculty of Business, Sohar University)

  • Mojca Marc

    (Faculty of Economics, University of Ljubljana)

Abstract

This article explores if and how Enterprise Risk Management (ERM) influences market values of large US non-financial companies in the period from 2003 to 2012. This is the first empirical study that brings evidence on the effect of ERM on the value of non-financial companies and that explores not only the market reaction to the ERM announcement, but also the investors’ perception of long-term ERM usage. Our research shows evidence that ERM has a positive effect on the market value for a short period of time following the announcement of ERM implementation. After 2.67 years, the market premium for ERM companies fades away, so a company does not have a higher market value just because it has ERM. Our results indicate that ERM does not contribute to a company’s market value in the long term.

Suggested Citation

  • Danijela Miloš Sprčić & Marina Mešin Žagar & Željko Šević & Mojca Marc, 2016. "Does enterprise risk management influence market value – A long-term perspective," Risk Management, Palgrave Macmillan, vol. 18(2), pages 65-88, August.
    • Handle: RePEc:pal:risman:v:18:y:2016:i:2:d:10.1057_rm.2016.3
    DOI: 10.1057/rm.2016.3
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    References listed on IDEAS

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    Cited by:

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    2. Marko Jakšič & Matej Marinč, 2019. "Relationship banking and information technology: the role of artificial intelligence and FinTech," Risk Management, Palgrave Macmillan, vol. 21(1), pages 1-18, March.

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