International Journal of Management, Accounting and Economics
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Volume 4, No. 9, September 2017 Pages: 937 - 952
Enterprise Risk Management and Financial Performance: Evidence from Emerging Market
Erin Olayinka , Eriki Emoarehi , Arumona Jonah , Jacob Ame
Corresponding author:
erinolayinka[at]yahoo[dot]com
Abstract:
This study examines the impact of Enterprise Risk Management (ERM) on financial performance in the emerging market with special focus on the Nigerian financial sector. The study investigates 40 companies from the period 2012 to 2016 resulting into 200 firm observations. The method used to measure financial performance was Return on Assets (ROA) while Value at Risk (VaR) was used as a proxy for Enterprise Risk Management (ERM). The study used other control variables such as Leverage (LEV), Board Size (BSIZE), Firm Size (FSIZE), Institutional Ownership (INTOWN) and Risk Management Committee Size (RMC). The result of regression coefficient shows that VaR (0.216), BSIZE (0.218), FSIZE (0.021), INTOWN (0.001), and RMC (0.032) are statistically significant with the exception of LEV (-0.572) which shows an inverse relationship with financial performance. The empirical findings show that ERM is positively and significantly related to financial performance. The results support the hypothesis that ERM has a significant impact on the financial performance of listed firms in the Nigerian financial sector. We recommend that the regulatory authorities (Central Bank of Nigeria, Financial Reporting Council of Nigeria etc.) in charge of the financial sector should ensure that all firms in the sector adopt ERM as a matter of urgency and continue to ensure strict compliance with the ERM framework.
Keywords:
Enterprise Risk Management; Financial Performance; Nigerian Financial Sector; Return on Asset; Profitability.
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