The Impact of Enterprise Risk Management on Firm Value: Empirical Evidence from Romanian Non-Financial Firms

Enterprise risk management (ERM) represents a significant change in the way firms manage risks. In the last years, an increasing number of non-financial firms from emerging economies started to implement a holistic framework for risk management. However, little is known about the impact of ERM adoption on firm value in emerging markets. The aim of the paper is to investigate the effects of ERM implementation on the firm value in different economic environments. The empirical research of this study is conducted using econometric software EViews and panel data techniques. Employing a sample of Romanian listed firms for the pre-crisis period (2001-2007), it has been found that ERM adoption is associated with higher firm values, indicated by a Tobin's Q premium of roughly 46.5 %. Also, it has been found a positive and statistically significant relationship between size and leverage, on one hand, and firm value, on the other hand. Extending the sample over the financial crisis period (2001-2011), it has been found that ERM does not affect firm value in any significant manner. These findings lend support for the recent pressure on firms to adopt more integrated and comprehensive risk management systems.