Assessing the effects of corporate governance on enterprise risk management and firm value: Malaysian evidence

Corporate governance has been the subject of increasing interest following the 2008 global financial crisis. As a response to the crisis, Enterprise risk management (ERM) was introduced globally. Despite the claim that ERM is the solution for corporate governance deficiency, particularly in risk management practices, the number of empirical research studying this new field is still limited. Therefore, the current study has four research objectives that are(i) to assess the extent of ERM practices, (ii) to identify corporate governance characteristics that influence ERM implementation (iii) to examine the association between ERM and firm value and (iv) to propose and develop the dimensions that can effectively measure ERM implementation. Eighty-one usable questionnaires were successfully collected and analysed using Partial Least Squares structural equation modeling method (PLS-SEM). The results of this study support that corporate governance characteristics (board size and board expertise) have a positive and significant association with ERM implementation. However, there is no significant evidence on the association between ERM and firm value. Therefore, the findings of this study will enable companies to have better understanding on corporate governance characteristics that influence ERM implementation and its effect towards firm value. The ERM index developed in this study will helps companies and regulators to formulate better corporate governance and ERM practices