The long-term relationship between enterprise risk management and bank performance: the missing link in Nigeria

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This study investigates the relationship between Enterprise Risk Management adoption and implementation, and the performance of banks using a sample of four out of the seven Strategically Important Banks (SIB) listed on the Nigerian Stock Exchange covering the period from 2005 q1 to 2015 q2. In this study, we determined a measure for Enterprise Risk Management (ERM) adoption or implementation (ERM index) using an integrated Enterprise Risk Management measurement model for the banking sector suggested by Soliman and Mukhtar (2017). A time series Johansen’s cointegration test was used to obtain evidence of the long-term association between ERM and performance, while Vector Error Correction Model (VECM) analysis was performed to gather evidence of causality relationship between ERM and performance. Finally, Generalized Impulse Response Function was used to obtain evidence of how performance responds to the introduction of a shock on Enterprise Risk Management. This study makes significant contributions to the existing body of knowledge, as it yields the first Enterprise Risk Management-performance-based empirical results that indicate a long-term relationship, causation effects, in addition to responding to performance ERM.

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    • Figure 1. The conceptual framework for the study
    • Figure 2. Graphical result of generalized impulse response analysis
    • Table 1. ADF tests for ERM, ROAE, and FV
    • Table 2. Johansen co-integration test
    • Table 3. Granger causality test under VEC environment
    • Table 4. VECM with Firm Value (FV) as the dependent variable