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Business strategy, enterprise risk management and organizational performance

Author

Listed:
  • Sara Soltanizadeh
  • Siti Zaleha Abdul Rasid
  • Nargess Mottaghi Golshan
  • Wan Khairuzzaman Wan Ismail

Abstract

Purpose - This paper aims to identify the influence of business strategy on enterprise risk management (ERM) adoption and organizational performance (OP). In addition, the mediation effect of ERM on the relationship between business strategy and OP is assessed. Design/methodology/approach - A cross-sectional analysis of primary data gathered from 174 public listed companies in Malaysian Bourse through survey was conducted. Findings - Companies with cost leadership business strategy are more eager to implement ERM compared to companies with differentiation strategy. The results also indicate that ERM implementation has a significant positive impact on OP. Though ERM is a partial mediator of the relationship between cost leadership strategy and OP, it does not mediate the relationship between differentiation strategy and OP. Research limitations/implications - One of the limitations of this study was the small number of respondents, comprising only 174 public listed companies. In addition, the manifest variables adopted from previous studies may not be the best indicators to measure latent variables. Nonetheless, this study fills the gaps in ERM studies by determining the impact of different kinds of strategy on ERM adoption and investigating the mediating effect of ERM on the relationship between business strategy and OP. Practical implications - Although the trend in Malaysia seems to move toward ERM adoption, evidence shows that it is not widely practiced among Malaysian firms. Directors of Malaysian companies can understand better the impact of enterprise business strategy on the adoption of risk management and how ERM influences OP. The results of this study also provide valuable insights for the corporate governance regulatory authorities. Originality/value - This paper is among the few to assess the impact of firm’s strategy on ERM adoption and to determine the mediation effect of ERM on the relationship between business strategy and OP.

Suggested Citation

  • Sara Soltanizadeh & Siti Zaleha Abdul Rasid & Nargess Mottaghi Golshan & Wan Khairuzzaman Wan Ismail, 2016. "Business strategy, enterprise risk management and organizational performance," Management Research Review, Emerald Group Publishing Limited, vol. 39(9), pages 1016-1033, September.
    • Handle: RePEc:eme:mrrpps:v:39:y:2016:i:9:p:1016-1033
    DOI: 10.1108/MRR-05-2015-0107
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    Citations

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    Cited by:

    1. Sorin Gabriel Anton & Anca Elena Afloarei Nucu, 2020. "Enterprise Risk Management: A Literature Review and Agenda for Future Research," JRFM, MDPI, vol. 13(11), pages 1-22, November.
    2. Zhu, Delong & Li, Zhe & Mishra, Arunodaya Raj, 2023. "Evaluation of the critical success factors of dynamic enterprise risk management in manufacturing SMEs using an integrated fuzzy decision-making model," Technological Forecasting and Social Change, Elsevier, vol. 186(PA).
    3. López Lemus, Jorge Armando, 2019. "Habilidad política y estrategias de negociación integrativa y distributiva como factores influyentes en la autoeficacia emprendedora en México," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    4. Songling Yang & Muhammad Ishtiaq & Muhammad Anwar, 2018. "Enterprise Risk Management Practices and Firm Performance, the Mediating Role of Competitive Advantage and the Moderating Role of Financial Literacy," JRFM, MDPI, vol. 11(3), pages 1-17, June.
    5. Munther Al-Nimer & Sinan S. Abbadi & Ahmad Al-Omush & Habib Ahmad, 2021. "Risk Management Practices and Firm Performance with a Mediating Role of Business Model Innovation. Observations from Jordan," JRFM, MDPI, vol. 14(3), pages 1-20, March.
    6. Vincent Y. Chang, 2019. "Does reinsurance purchasing enhance insurers’ competitiveness? Evidence from the U.S. property–liability insurance industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(4), pages 595-623, October.
    7. Jacqueline Y. Sánchez-García & Juan E. Núñez-Ríos & Manuel Soto-Pérez & Pedro Pablo Cardoso-Castro & Alejandro Rodríguez-Magaña, 2020. "A Systems Science Approach to Inter-Organisational Complementarity in Tourism SMEs," Systemic Practice and Action Research, Springer, vol. 33(1), pages 1-25, February.

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