Abstract
Orientation: The article discusses the relationship between enterprise risk management
(ERM) and firm value.
Research purpose: The purpose of the study is to empirically examine the relationship
between ERM and firm value. The study is undertaken within the context of the Chinese
insurance industry.
Motivation for the study: Recent attempts to link ERM with firm value have been undertaken
primarily in the USA and Europe and have produced ambiguous and inconclusive findings.
Research design, approach and method: Data was obtained from the China Insurance
Regulatory Commission, a government body responsible for regulating insurance products
and services in China. The data sample consisted of 135 insurance companies operating in
China (in 2010). Regression modelling is employed to analyse the data.
Main findings: The results show the relationship between ERM and firm value at first appears
statistically significant within a Pearson correlation matrix but then falls below statistical
significance on closer scrutiny through regression analysis. Accordingly, it is recommended
that insurers in China should not look to aggressive investment in ERM as a strategy for
producing quick gains in firm value.
Practical/managerial implications: Risk managers should plan ERM development from a risk
management maturity perspective, which equates the highest level of ERM development with
ERM’s capacity to improve firm resilience to the unknown and serve as a mechanism for
strategic decision-making.
Contribution/value-add: The study employed return on equity as a proxy for firm value,
utilising ordinary least squares regression modelling to test propositions of the relationships
between variables.