Does enterprise risk management benefit manufacturing firms? Evidence from China

Abstract

It is observed that Enterprise risk management (ERM) framework has been adopted by some manufacturing firms in China in the past years. To investigate the effectiveness of ERM, data of A-share listed manufacturing firms in Shanghai and Shenzhen stock exchange during 2010-2019 are adopted from Wind database and CSMAR database, two large domestic databases, to examine the impact of ERM on value of manufacturing firms. Treatment effects model and genenralised method of moments (GMM) are employed to derive the empirical results. Our results show that adoption of ERM can add value to the firms, and firms benefit more from high-quality ERM program. Furthermore, the impact of ERM seems to be more significant among the manufacturing firms with smaller scale, or stronger institutional shareholding, or international business. Our findings encourage the manufacturing firms to implement ERM program and improve the program to achieve its targets.