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The Effect of Enterprise Risk Management Implementation on the Value of Companies Listed on the Nairobi Stock Exchange

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  • Nelson Waweru
  • Eric Kisaka

Abstract

This study assesses the level of implementation of Enterprise Risk Management (ERM) in companies listed in the Nairobi Stock Exchange (NSE). The study also seeks to test the significance of factors affecting this level of ERM implementation and to investigate whether the level of ERM implementation has a positive effect to the value of companies as measured by Tobin’s Q. Data was collected from a sample of 22 companies listed on the NSE for the periods ended December 2009. The research findings show that most of the organizations sampled viewed ERM implementation as a strategic business initiative as compared to a compliance requirement. The study also finds that there is a significant relationship between the appointment of a Chief Risk Officer and the level of Enterprise Risk Management Implementation in companies. However, it does not find a significant relationship between the level of ERM implementation and the following variables; industry of operation, level of board independence, size of the firm, and growth rate of the firm. Consistent with prior research, this study also found a significant relationship between a company’s level or Enterprise Risk Management implementation and the company’s value. The results of this study show that an increase in the level of ERM implementation in companies had a positive contribution to the value of the companies.

Suggested Citation

  • Nelson Waweru & Eric Kisaka, 2013. "The Effect of Enterprise Risk Management Implementation on the Value of Companies Listed on the Nairobi Stock Exchange," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 3(3), pages 1-7.
    • Handle: RePEc:spt:apfiba:v:3:y:2013:i:3:f:3_3_7
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    Citations

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    Cited by:

    1. Saida Amansou & Hajar Benjana, 2021. "Proposal for a 6C model of maturity of integrated risk management in the service sector [Proposition d'un modèle des 6C de maturité de la gestion intégrée des risques dans le secteur des services]," Post-Print hal-03690144, HAL.
    2. Grace Kakiya & Lucy Rono & Jared Mose, 2019. "Effect of Risk Management, Intellectual Capital on Performance of State Corporations in Kenya: Moderating Approach," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 12(3), pages 51-61, December.
    3. Levente Bakos & Dănuț Dumitru Dumitrașcu, 2021. "Decentralized Enterprise Risk Management Issues under Rapidly Changing Environments," Risks, MDPI, vol. 9(9), pages 1-19, September.
    4. Ai Ping Teoh & Kaih Yeang Lee & Rajendran Muthuveloo, 2017. "The Impact of Enterprise Risk Management, Strategic Agility, and Quality of Internal Audit Function on Firm Performance," International Review of Management and Marketing, Econjournals, vol. 7(1), pages 222-229.
    5. Muhammad Kashif Shad & Fong-Woon Lai, 2021. "Enterprise Risk Management Implementation and Firm Performance: Evidence from the Malaysian Oil and Gas Industry," International Journal of Business and Management, Canadian Center of Science and Education, vol. 14(9), pages 1-47, July.
    6. Mohamed Santigie Kanu, 2021. "A Theoretical Framework for Enterprise Risk Management and Organizational Performance," International Business Research, Canadian Center of Science and Education, vol. 14(5), pages 1-63, May.
    7. Kakiya Grace Girangwa & Lucy Rono & Jared Mose, 2020. "The Influence of Enterprise Risk Management Practices on Organizational Performance: Evidence from Kenyan State Corporations," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 8(1), pages 11-20.

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