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Enterprise risk management and investment efficiency: Australian evidence from risk management committees

Author

Listed:
  • Haiyan Jiang

    (Department of Accounting and Corporate Governance, Macquarie University, Sydney, NSW, Australia)

  • Jing Jia

    (School of Business and Economics, University of Tasmania, Australia)

  • Larelle (Ellie) Chapple

    (QUT Business School, Queensland University of Technology, Brisbane, QLD, Australia)

Abstract

This study investigates whether and how effective risk management committees (RMCs) improve corporate investment efficiency. Using a sample of listed companies included in the Australian Securities Exchange (ASX) 300 index, we document that effective RMCs improve investments’ sensitivity to growth opportunities and profitability. The results also reveal that effective RMCs enhance corporate investment efficiency by restricting not only over- but also underinvestment. Subsequent analyses demonstrate that the positive effect of RMCs on investment efficiency is due to the reduced information asymmetry and free cash flow problems. Furthermore, we find a more pronounced effect of RMCs on investment efficiency when companies experience a high level of economic policy uncertainty (EPU) and financial constraint. JEL Classifications: G14, G34, M41

Suggested Citation

  • Haiyan Jiang & Jing Jia & Larelle (Ellie) Chapple, 2024. "Enterprise risk management and investment efficiency: Australian evidence from risk management committees," Australian Journal of Management, Australian School of Business, vol. 49(3), pages 366-402, August.
    • Handle: RePEc:sae:ausman:v:49:y:2024:i:3:p:366-402
    DOI: 10.1177/03128962221144513
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    More about this item

    Keywords

    Economic policy uncertainty; financial constraint; investment efficiency; risk management committee;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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