Abstract
This paper examines the influential factors of potential adoption of Enterprise Risk Management (ERM) and the impact of ERM adoption on the public listed banking firms’ performances in Indonesia during 2009 to 2017. This research uses logistic regression to test four potential factors as the driving forces behind the potential adoption of ERM and linear regression to test the impact of ERM on firms’ performances. The result suggests that firms with greater size, having more institutional ownership, and being part of Multinational companies are more likely to adopt ERM, while the implementation of ERM has no significant impact on the firms’ performance. Little empirical research has been conducted on the topic, especially in developing economies like Indonesia. This study will broaden the scope of literature by providing novel empirical evidence.
Highlights
Liberalization has made economics becoming more complex and volatile so that the risk faced by economic agents arising [1]
The sample was derived from the banking firms which listed in Bursa Efek Indonesia (BEI) during 2009 to 017
The main objective of this study was to identify the influential factors that encourage the implementation of Enterprise Risk Management (ERM) among banking firms in Indonesia
Summary
Liberalization has made economics becoming more complex and volatile so that the risk faced by economic agents arising [1]. The firms with high financial leverage tend to implement ERM in their risk oversight [2]. The firms with higher financial leverage and with a Big Four auditors are more likely to have a form of an ERM framework in place [3]. Throughout this study, the determinants of potential adoption of ERM will be identified. The second model was built to test the impact of the ERM adoption on public listed banking firms’ financial performance in Indonesia
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