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Enterprise risk management and firm performance evidence from financial market of Iran

Author Affiliations

  • 1Dept. of Accounting, Mashhad Branch, Islamic Azad University, Mashhad, Iran
  • 2Dept. of Accounting, Mashhad Branch, Islamic Azad University, Mashhad, Iran

Res. J. Management Sci., Volume 6, Issue (3), Pages 6-12, March,6 (2017)

Abstract

The purpose of present research is examine the effect of enterprise risk management (ERM) approaches on firms’ performance by investigating financial asset and market variables and its effect on ERM. Using a sample of 66 firms which report establish Risk Assessment Unit (RAU) or administrative units with same functions as an administrative division. Research results shows that firms adopting ERM have meaningful decrease in their stock price fluctuations and unpredictability. Firms establishing Risk Assessment Unit (RAU) compared to similar and non-RAU firms in their industry group, have considerable improvement in dispel their asset opacity, decreased market to book ratio and decreased earnings volatility. In addition, we find that there is a meaningful negative relationship between the change in firms’ market to book ratio and earnings fluctuations. Our finding confirm that banks and financial institutions increase leverage after ERM implementation. Finally, we find no meaningful evidence to support that ERM can have an important role in value creating.

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