Economics

THE RELATIONSHIP BETWEEN ENTERPRISE RISK MANAGEMENT (ERM) AND FIRM VALUE: EVIDENCE FROM MALAYSIAN PUBLIC LISTED COMPANIES

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Enterprise Risk Management is believed to have an impact of firm value. However empirical evidence on its impact is still considered scarce. The objective of this study is to estimate the relation between ERM and firm value in the Malaysian public listed companies. Tobin’s Q is used to measure the firm value. The approach employed is to model firm value (TOBIN’S Q) as a function of Enterprise Risk Management (ERM) and other determinants: size (SIZE); leverage (LEV); profitability (ROA); international diversification (INTDIV); and majority ownership (OWN). The study is based on 2007 for 528 companies. Our findings suggest that the regression model is significant at the 1 percent level with the adjusted R-squared of 0.654. Empirical results report that ERM is positively related to firm value but it is not significant. The results do not support the hypothesis that firms which practice ERM would have a higher Tobin’s Q ratio than firms which are not. SIZE and ROA establish a negative and significant relationship with firm value. LEV and companies that do not diversify internationally (INTDIV = 0) have a positive and significant relationship with firm value. Finally OWN is positive but not significantly related to firm value.

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1-10

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English

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NONE

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THE RELATIONSHIP BETWEEN ENTERPRISE RISK MANAGEMEN

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