Factors Affecting Enterprise Risk Management in the Public Listed Financial Services Sector

Abstract

The purpose of this study is to investigate the relationship of factors or determinants that could affect Enterprise Risk Management (ERM), focusing on the financial services sector listed in Bursa Malaysia. The study used 31 financial services companies’ annual reports from 2011 until 2020. A logit regression approach is used, and the dummy variable used as the dependent variable is equal to one if firms implement ERM and zero if not. Four independent variables are firm size, leverage, profitability, and cash reserves. The findings of this study are that profitability, leverage, and cash reserves are significant factors in ERM implementation. However, firm sizes show negative related to ERM implementation. This research is limited to the industry that only focuses on the financial services sector and some companies do not have annual report information. Nevertheless, the research demonstrates how the company that implements ERM or has Chief Risk Officer will be able to manage their risk systematically and do decision-making better. This study focuses on the implementation of ERM in the financial services industry, where most researchers focus on all sectors and relate ERM implementation with firm value