Evidence of the value of Enterprise Risk Management

First, our univariate findings (which do not hold constant other determinants of value) support the contention that ERM enhances firm value. Second, the average ERM user is larger, less leveraged, less opaque, and has less financial slack and lower stock return volatility than the average non-user. Furthermore, ERM users tend to have higher levels of institutional ownership, suggesting that sophisticated investors take a favourable view of ERM. Finally, the average ERM user relies less on reinsurance than the average non-user; and the annual change in value is greater for the average ERM user than for the average non-user. Larger firms with lower levels of leverage, higher levels of institutional ownership, and lower levels of reinsurance use were all more likely to be users of ERM. The most important finding of our study was the positive and significant coefficient on ERM in the Q equation.