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Enterprise risk management quality and firm value: Evidence from corporate reputation risk theory

Author

Listed:
  • Sulaiman Ademola Oreshile

    (Universiti Malaya)

  • Nurul Shahnaz Mahdzan

    (Universiti Malaya)

  • Rozaimah Zainudin

    (Universiti Malaya)

Abstract

This study empirically tests the Eisenegger and Imhof reputation risk theory to provide new insights into a robust conceptualization and measurement of corporate reputation risk (CRRisk) as well as its relationship with firm value (FV). We further investigate whether enterprise risk management quality (ERMQ) matters for the CRRisk-FV nexus. Using panel data of listed non-financial firms from sub-Saharan Africa from 2014 to 2020, analyzed using the least square dummy variable (LSDV) estimator, we provide empirical evidence that CRRisk diminishes FV. Also, we find considerable evidence that ERMQ attenuates CRRisk towards FV. We also provide evidence that high-quality ERM is contingent on firm size, profitability, environmental uncertainty, and corporate risk-taking. Our findings are robust to channel and regional analyses, dimensions of CRRisk, and endogeneity using the GMM estimator. Our findings remind shareholders and regulators to intensify pressure on firms to increase their investment in high-quality ERM systems to signal a commitment to sound risk governance, curbing managerial opportunism, and monitoring decisions detrimental to firms' reputations and value.

Suggested Citation

  • Sulaiman Ademola Oreshile & Nurul Shahnaz Mahdzan & Rozaimah Zainudin, 2025. "Enterprise risk management quality and firm value: Evidence from corporate reputation risk theory," Risk Management, Palgrave Macmillan, vol. 27(1), pages 1-31, February.
    • Handle: RePEc:pal:risman:v:27:y:2025:i:1:d:10.1057_s41283-024-00153-5
    DOI: 10.1057/s41283-024-00153-5
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    More about this item

    Keywords

    Corporate reputation risk; ERM quality; Sub-Saharan Africa; Tobin’s Q; Non-financial firms;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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