Enterprise Risk Management and firm performance: an integrated model for the banking sector
-
DOIhttp://dx.doi.org/10.21511/bbs.12(2).2017.12
-
Article InfoVolume 12 2017, Issue #2, pp. 116-123
- Cited by
- 2350 Views
-
836 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
This study investigates how the implementation of Enterprise Risk Management program affects the performance of firms using an Enterprise Risk Management model for the banking sector and an integrated model for measuring Enterprise Risk Management index used in the study by Mukhtar and Soliman (2016). Ten listed commercial banks were selected with the Enterprise Risk Management index as the main independent variable, with Return on Average Equity (ROAE), Share Price Return (SPR) and Firm Value (FV) used as three separate dependent variables. The study provides strong evidence of a positive relationship between Enterprise Risk Management implementation and performance in the Nigerian banking sector. The findings and conclusions of this study are consistent with those of other studies that used data from different industries, providing a basis from which to generalize the findings from this study to firms in other industries.
- Keywords
-
JEL Classification (Paper profile tab)G21, G31, G32
-
References38
-
Tables6
-
Figures1
-
- Fig. 1. ERM model for the banking sector
-
- Table 1. Summary of results of residual diagnostic test for regression model 1
- Table 2. OLS - regression model 1
- Table 3. Diagnostic tests for regression model 2
- Table 4. OLS - regression model 2
- Table 5. Summary of results of residual diagnostic test for regression model 3
- Table 6. Summary of results of Ordinary Least Square Regression - regression model 3
-
- Andersen, T. (2008). The Performance Relationship of Effective Risk Management: Exploring the Firm-Specific Investment Rationale. Long Range Planning, 41(2), 155-176.
- Agusto and Agusto & Co Research. (2010). Banking Industry Report, Lagos. Agusto & Co. Ltd.
- Agusto and Agusto & Co Research. (2013). Banking Industry Report, Lagos. Agusto & Co. Ltd.
- Agusto and Agusto & Co Research. (2014). Banking Industry Report, Lagos. Agusto & Co. Ltd.
- Arena, M., Arnaboldi, M., and Azzone, G. (2010). The organizational dynamics of enterprise risk management. Accounting, Organizations and Society, 35(7), 659-675.
- Baxter, R., Bedard, J. C., Hoitash, R., and Yezegel, A. (2013). Enterprise risk management program quality: Determinants, value relevance, and the financial crisis. Contemporary Accounting Research, 30(4), 1264-1295.
- Beasley, M. S., Clune, R., and Hermanson, D. R. (2005b). Enterprise risk management: An empirical analysis of factors associated with the extent of implementation. Journal of Accounting and Public Policy, 24(6), 521-531.
- Beasley, M., Pagach, D., and Warr, R. (2008). Information conveyed in hiring announcements of senior executives overseeing enterprise-wide risk management processes. Journal of Accounting, Auditing Finance, 23(3), 311-332.
- Campbell, D. (2008). Nonfinancial Performance Measures and Promotion-Based Incentives. Journal of Accounting Research, 46(2), 297-332.
- Central Bank of Nigeria. (2010d). Regulation on the Scope of Banking Activities and Ancillary Matters. 3(2010), Abuja, Nigeria.
- Central Bank of Nigeria. (2013). Bank Intermediation in Nigeria: Growth, Competition, and Performance of The Banking Industry, 1990–2010, Abuja, Nigeria.
- Committee of Sponsoring Organisations of the Treadway Commission. (2004). Enterprise Risk Management (ERM) COSO Framework.
- Dafikpaku, E. (2011). The Strategic Implications of Enterprise Risk Management: A Framework. Paper presented at ERM Symposium.
- Dash, M., and Das, A. (2013). Performance Appraisal of Indian Banks Using CAMELS Rating. The IUP Journal of Bank Management, 12(2), 31-42.
- Eckles, D., Hoyt, R., and Miller, S. (2011). The Impact of Enterprise Risk Management on the Marginal Cost of Reducing Risk: Evidence from the Insurance Industry. Social sciences Research Network.
- Flamini, V., McDonald, C., and Schumacher, L. (2009). The Determinants of Commercial Bank Profitability in Sub-Saharan Africa. IMF Working Paper (WP/09/15).
- Francis, M. E. (2013). Determinants of Commercial Bank Profitability in Sub-Saharan Africa. International Journal of Economics and Finance, 5(9), 67-79.
- Gates, S., Nicolas, J., and Walker, P. (2012). Enterprise Risk Management: A Process for Enhanced Management and Improved Performance. Management Accounting Quarterly. Spring 2012, 13(3), 28-38.
- Gordon, L., Loeba, M., and Tseng, C. (2009). Enterprise risk management and firm performance: A contingency perspective. Journal of Accounting and Public Policy, 28(4), 301-327.
- Greuning, H., and Brajovic Bratanovic, S. (2009). Analyzing banking risk. Washington, D.C.: World Bank.
- Gujarati, D. N., and Porter, D. C. (2010a). Essentials of Econometrics, Fourth edition. New York: McGraw-Hill International Edition.
- Gujarati, D. N. (2010b). Econometrics by Example. Macmillan Publishers, London.
- Hoyt, R., and Liebenberg, A. (2010). The Value of Enterprise Risk Management. Journal of Risk and Insurance, 4(1), 123-145.
- Koch, T. W., and MacDonald, S. S. (2010). Bank Management, Seventh edition. South Western Cengage Learning, Mason Ohio.
- McShane, M., Nair, A., and Rustambekov, E. (2011). Does enterprise risk management increase firm value? Journal of Accounting, Auditing and Finance, 26(4), 641-658.
- Obalola, M. A., Akpan, T. I., and Abass, O. A. (2014). The Relationship between Enterprise Risk Management (ERM) and Organizational Performance: Evidence from Nigerian Insurance Industry. Research Journal of Finance and Accounting, 5(14).
- Ongore, V. O., and Kusa, G. B. (2013). Determinants of Financial Performance of Commercial Banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237-252.
- Paape, L., and Spekle, R. F. (2012). The adoption and design of enterprise risk management practices: An empirical study. European Accounting Review, 21(3), 533-564.
- Pagach, D., and Warr, R. (2007). An Empirical Investigation of the Characteristics of Firms Adopting Enterprise Risk Management.
- Pagach, D. and Warr, R. (2010). The Effects of Enterprise Risk Management on Firm Performance”. Social sciences Research Network.
- Pagach, D., and Warr, R. (2011). The characteristics of firms that hire chief risk officers. Journal of Risk and Insurance, 78(1), 185-211.
- Ping, T. A., and Muthuveloo, R. (2015). The Impact of Enterprise Risk Management on Firm Performance: Evidence from Malaysia. Asian Social Science, 11(22), 1911-2025.
- Quon, T., Zeghal, D., and Maingot, M. (2012). Enterprise Risk Management and Firm Performance. Procedia - Social and Behavioural Sciences, 62(2), 263-267.
- Ramlee, R., and Ahmad, N. (2015). Panel Data Analysis on the Effect of Establishing the Enterprise Risk Management on Firms’ Performances. 4th European Business Research Conference 9 - 10 April 2015, Imperial College, London, UK.
- Sanusi, S. (2010). Global Financial Crises Impact in Nigeria, Nigerian Financial Reforms and the Roles of Multilateral Development Banks and IMF. Submission to the House Financial Services Committee of the US Congress Hearing on the Global Financial Crisis. [report].
- Central Bank of Nigeria.
- Standard & Poor’s. (2007). Request for comment: Enterprise risk management analysis for credit ratings of nonfinancial companies.
- Tekathen, M., and Dechow, N. (2013). Enterprise risk management and continuous realignment in the pursuit of accountability: A German case. Management Accounting Research, 24(2), 100-121.