Abstract
This study focused on scrutinizing the influence of Enterprises Risk Management (ERM) on firm performance with a mediating role of Business Model Innovation (BMI). For the purpose, data from 228 Jordanian firms was collected and analyzed. The results indicated that the ERM practices have a significant influence on BMI and financial firm’s performance. The BMI significantly contributed to the financial and nonfinancial performance, whereas it displayed insignificant effects regarding environmental performance. The BMI fully mediated the relationship between ERM practices and financial performance, where a partial mediating effect was observed for the path between ERM practices and nonfinancial performance, while showed no mediating role between the ERM practices and environmental performance. Economies of countries like Jordan are hereby urged to implement the formal ERM practices and to financially educate their top management teams to apply the BMI to gain first-rate performance. This study also encourages the researchers from other countries to extend this model to their economies to unleash useful insights.
Highlights
Several strategies have been introduced to gain desirable environmental, financial and nonfinancial performance namely modern technology (Chege and Wang 2020; Singh et al 2019), financial resources (Khattak 2020; Memon et al 2020), intellectual capital (Demartini and Beretta 2020), entrepreneurial orientation (Amankwah-Amoah et al 2019), knowledge management (Kmieciak and Michna 2018; Roxas and Chadee 2016) and enterprise risk management (ERM) (Brustbauer 2016; Shad et al 2019), all of which are found to be relevant and important but the ERM in particular has become a key predictor of performance in financial institutions because they are persistently engaged in the reduction of financial loss and risk (Rasid et al 2014)
This shows that the ERM is significantly related to Business Model Innovation (BMI) (r = 0.173, p < 0.01), financial performance (r = 0.215, p < 0.01), nonfinancial performance (r = 0.297, p < 0.01) and environmental performance (r = 0.199, p < 0.01)
This research extends the scope of the Resource-Based View (RBV) theory by examining the influence of ERM on the financial, nonfinancial and environmental performance of financial institutions in an emerging market
Summary
Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. The detrimental reasons for examining the mediating role of BMI in this study includes that the previous studies have presented fragmented results (negative, positive and no relationship) between ERM and performance (Di Gravio et al 2013; Lin et al 2012; Rehman and Anwar 2019), while some studies have claimed that ERM practices do not directly improve firm performance and that other determinants mediate and moderate the paths (Wijethilake and Lama 2019; Wu and Wu 2014; Yang et al 2018). We assessed whether the intangible resource, namely ERM, contributes to firm performance through BMI or not This theory has been tested in other domains of research, it has not yet been discussed in the context of ERM, BMI and the performance of financial institutions
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