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Enterprise risk management and firm performance: A contingency perspective

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  • Gordon, Lawrence A.
  • Loeb, Martin P.
  • Tseng, Chih-Yang

Abstract

In recent years, a paradigm shift has occurred regarding the way organizations view risk management. Instead of looking at risk management from a silo-based perspective, the trend is to take a holistic view of risk management. This holistic approach toward managing an organization's risk is commonly referred to as enterprise risk management (ERM). Indeed, there is growing support for the general argument that organizations will improve their performance by employing the ERM concept. The basic argument presented in this paper is that the relation between ERM and firm performance is contingent upon the appropriate match between ERM and the following five factors affecting a firm: environmental uncertainty, industry competition, firm size, firm complexity, and board of directors' monitoring. Based on a sample of 112 US firms that disclose the implementation of their ERM activities within their 10Ks and 10Qs filed with the US Securities and Exchange Commission, empirical evidence confirms the above basic argument. The implication of these findings is that firms should consider the implementation of an ERM system in conjunction with contextual variables surrounding the firm.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Accounting and Public Policy.

Volume (Year): 28 (2009)
Issue (Month): 4 (July)
Pages: 301-327

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Handle: RePEc:eee:jappol:v:28:y:2009:i:4:p:301-327

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Web page: http://www.elsevier.com/locate/jaccpubpol

Related research

Keywords: Enterprise risk management Firm performance Contingency theory Management control systems;

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Cited by:
  1. Blome, Constantin & Schoenherr, Tobias, 2011. "Supply chain risk management in financial crises--A multiple case-study approach," International Journal of Production Economics, Elsevier, vol. 134(1), pages 43-57, November.
  2. Giorgio Stefano Bertinetti & Elisa Cavezzali & Gloria Gardenal, 2013. "The effect of the enterprise risk management implementation on the firm value of European companies," Working Papers 10, Department of Management, Università Ca' Foscari Venezia.

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