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Enterprise Risk Management

In: Handbook of Insurance

Author

Listed:
  • Robert E. Hoyt

    (University of Georgia)

  • Andre P. Liebenberg

    (University of Mississippi)

Abstract

This chapter discusses the evolution of the literature on enterprise risk management (ERM). We identify and summarize three prominent streams of ERM literature. Early scholars focused on the determinants of ERM usage and found that ERM is motivated by factors consistent with value maximization as well as pressure from regulators and other external stakeholders. The next stream of research focused on the value relevance of ERM—with the majority of studies finding that firms engaging in ERM, and those with higher quality ERM programs, tend to have greater firm value. The most recent group of studies focuses on the specific channels through which ERM enhances value and finds that ERM reduces the marginal cost of risk reduction, moderates the negative effect of business diversification, reduces the cost of capital, and improves efficiency. Our discussion concludes with a call for additional research on each of these topics using refined measures, methods, and samples that are larger and more representative of the aggregate economy.

Suggested Citation

  • Robert E. Hoyt & Andre P. Liebenberg, 2025. "Enterprise Risk Management," Springer Books, in: Georges Dionne (ed.), Handbook of Insurance, edition 0, pages 415-425, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-69674-9_13
    DOI: 10.1007/978-3-031-69674-9_13
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    More about this item

    Keywords

    Enterprise risk management (ERM); Determinants of ERM; Regulators; External stakeholders; Firm value; Risk reduction; Business diversification; Cost of capital; Firm efficiency;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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