Enterprise risk management and value

: evidence from the utility sector

Abstract

In the last decade, the importance of Enterprise Risk Management (ERM) is emerging and becoming a critical point of discussion and focus on firms due to high uncertainty environments and the economic and financial crisis. The literature and economic theory relate ERM implementation to an increase in firm value and better firms’ performance. This research objective is to analyze the relationship between ERM implementation and firm value in firms from the Utility sector, which is a sector that is constantly changing and innovating due to climate change strategies, decarbonization goals and consumer preferences. To respond to the research question I build a regression, where the explained variable is Tobin’s Q as a proxy to firm value and the explanatory variable is an ERM Score as proxy to firms ERM implementation level. As control variables, I added accounting variables and corporate governance variables that are generally proposed in the literature and other researches like company size, financial leverage, Return on Assets, sales growth, Board size and independence, and dividends. As a sample, I collected data from 10 firms (2 Portuguese and 8 European) from 2017, 2018, 2019, a total of 30 observations. The result demonstrates that Enterprise Risk Management implementation has no significant impact on firms’ value, at the moment. In other words, the market still does not react and recognizes different levels of ERM implementation as a competitive factor to firm value add. It could result from the fact that Enterprise Risk Management implementation also does not have a significant impact on firms accounting performance, as demonstrated in my robustness check analysis. These results vi i are also influenced by the high level of implementation of Enterprise Risk Management in the firms that constitute the sample.

Date of Award	8 Jul 2021
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Cunha (Supervisor)