Journal article
Enterprise Risk Management and the Cost of Capital
The Journal of risk and insurance, Vol.85(1), pp.159-201
03/01/2018
DOI: 10.1111/jori.12152
Abstract
Enterprise risk management (ERM) is a process that manages all risks in an integrated, holistic fashion by controlling and coordinating any offsetting risks across the enterprise. This research investigates whether the adoption of the ERM approach affects firms' cost of equity capital. We restrict our analysis to the U.S. insurance industry to control for unobservable differences in business models and risk exposures across industries. We simultaneously model firms' adoption of ERM and the effect of ERM on the cost of capital. We find that ERM adoption significantly reduces firm's cost of capital. Our results suggest that cost of capital benefits are one answer to the question how ERM can create value.
Details
- Title: Subtitle
- Enterprise Risk Management and the Cost of Capital
- Creators
- Thomas R. Berry-Stolzle - University of IowaJianren Xu - California State University, Fullerton
- Resource Type
- Journal article
- Publication Details
- The Journal of risk and insurance, Vol.85(1), pp.159-201
- DOI
- 10.1111/jori.12152
- ISSN
- 0022-4367
- eISSN
- 1539-6975
- Publisher
- Wiley
- Number of pages
- 43
- Language
- English
- Date published
- 03/01/2018
- Academic Unit
- Finance
- Record Identifier
- 9984380396402771
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