1、中文 4150 字 原文 ： The effects of enterprise risk management on firm performance Pagach. Donald P. and Warr. Richard S We study the effect of adoption of enterprise risk management (ERM) principles on firms long-term performance by examining how financial, asset and market characteristics change around
2、the time of ERM adoption. Using a sample of 106 firms that announce the hiring of a Chief Risk Officer (an event frequently accompanied by adoption of Enterprise Risk Management) we find that some firms adopting ERM experience a reduction in earnings volatility. In general however, we find little im
3、pact from ERM adoption on a wide range of firm variables. While our results could be due to lower power tests, they also raise the question of whether ERM is achieving its stated goals. Overall, our results fail to find support for the proposition that ERM is value creating, although further study i
4、s called for, in particular the study of how ERM success can be measured. 1、 Introduction Enterprise risk management (ERM) is an increasingly popular strategy that attempts to holistically evaluate and manage all of the risks faced by the firm. In doing so, ERM uses the firms risk appetite to determ
5、ine which risks should be accepted and which should be mitigated or avoided. While there has been a considerable increase in practitioner attention on ERM in recent years, little academic research exists about ERM, and in particular about the consequences of ERM on firm performance. This is true eve
6、n though the Conference Board has found that a large number of companies are now starting to use ERM as a strategic management tool (The Conference Board, July 2005). In addition, Standard and Poors has introduced enterprise risk management analysis into its global corporate credit rating process st
7、arting in the third quarter of 2008 (Standard and Poors, May 2008). This purpose of this paper is to examine the effect of ERM implementation, and to establish whether firms adopting ERM actually achieve observable results consistent with the claimed benefits of ERM. We believe that our work is impo
8、rtant and timely because although many surveys have stated the benefits of adopting ERM (Marsh and McLennan, 2005), there has been little empirical evidence on how ERM affects firms. We argue that the primary goal of ERM is to reduce the probability of financial distress and allow firms to continue
9、their investment strategies by reducing the effect lower tail outcomes, whether earnings or cash flow, caused by unexpected events. Having smoother, steadier earnings and cash flow performance allows the firm to increase leverage, pursue more growth options and perhaps be more profitable. Our resear
10、ch focuses on the following questions. First, do firms experience a change in earnings volatility around ERM adoption? This research question examines the proactive nature of ERM and whether companies adopting ERM are able to protect themselves from severe earnings events and generate smoothed earni
11、ngs. The COSO ERM framework states that ERM aids in reducing operational surprises and losses by allowing managers to better identify potential events that cause such surprises. Firms can then establish responses to reduce the effects of these surprises (COSO, 2004). Second, do firms adopting ERM im
12、prove financial performance relative to past performance and after controlling for industry performance? This research question provides evidence on the view that ERM has value creating ability； captured in the following statement: “There is clearly a heightened awareness of the need to manage risks
13、 more strategically in order to achieve expected shareholder value (The Conference Board, July 2005)”. Under this view ERM creates value by identifying and proactively addressing risks. Third, do firms financial characteristics, such as leverage, growth and asset opacity change after ERM implementat
14、ion? This research question examines the effect that ERM has on the firm and whether ERM processes change critical risk interdependencies. Proponents argue that an additional benefit of initiating ERM is that it allows firms to seize opportunities by allowing managers to better identify and more eff
15、ectively assess capital needs and improve capital allocation (COSO, 2004). Understanding whether or not ERM is achieving its stated goals is an important question. First, significant resources, both corporate and governmental are being expended on understanding, developing and implementing ERM progr
16、ams. Second, even if ERM provides a consistent process for risk identification it is possible that the benefits are not significant enough to become evident in the firms financial performance. ERM is not a costless activity, and as such, if it fails to deliver observable benefits, its implementation
17、 may be called into question. As a preview of our results we find little evidence that adoption of ERM results in significant changes in our sample firms. However, when we examine a subset of firms for whom the market perceived ERM adoption as most beneficial, we find some evidence of risk reduction
18、. 2. Hypothesis Development In a frictionless capital market with no asymmetric information, risk management at the firm level should be a negative NPV project. However, Stulz (1996, 2003) and Nocco and Stulz (2006) present arguments under which risk management activities could be value increasing f
19、or shareholders when agency costs, market imperfections and information asymmetries interfere with the operation of perfect capital markets. Although risk is generally considered to be the possibility of outcomes that deviate from what was expected, it is primarily negative outcomes that are of most
20、 concern to firms. Stulz (1996, 2003) argues that any potential value creation role for risk management is in the reduction or elimination of “costly lower-tail outcomes.” Lower tail outcomes are primarily negative earnings and cash flow shocks and can have both direct and indirect costs. Direct cos
21、ts are incurred in events such as bankruptcy and financial distress when the firm must make outlays to creditors, lawyers and courts. Indirect costs of associated with negative earnings and cash flow shocks, include the loss of reputation that may affect customer and vendor relationships. In additio
22、n, indirect costs hamper the ability to pursue profitable growth options, and the ability to realize the full value of intangible assets upon liquidation. A decline in debt ratings and the resulting increase in borrowing costs can also be costly for shareholders in that previously positive NPV projects may now have to be foregone.
