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Value Creating Determinants Of Enterprise Risk Management And Its Economic Value Added

Table 1:

Value Maximization Theory Determinants (a) Hi (b) Questionnaire/ Hypotheses statement/ Dependent Variable (c)
Cost of financial distress H1: ERM significantly reduces expected costs of financial distress
Lowering tax burden H2: ERM significantly reduces company’s expected taxes
Cost for external financing H3: ERM significantly reduces the cost for external financing
Agency problem H4: ERM significantly reduces volatility of managers’ bonuses and salaries
Informational asymmetries H5: ERM significantly reduces information gap between managers and investors
Net operating profit after tax H6: ERM implementation has significant positive effect on Net Operating profit after tax of the firms.
Weighted average cost of capital H7: ERM implementation has a significant positive effect on reducing Weighted Average Cost of Capital.
Return on invested capital H8: ERM implementation has significant positive effect on return on invested capital.
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