| The financial crisis of 2008–2009 has led to the increased adoption of Enterprise Risk Management (ERM). While there has been significant growth in the number of ERM implementations, there fails to be a clear understanding of the association between ERM and firm financial performance. This study expands upon previous inquiries into the financial benefits of ERM adoption by empirically testing the association between ERM, as defined by the COSO ERM framework, and firm financial performance. Additionally, this study attempts to understand if specific components of ERM, based on the COSO ERM framework, are associated with firm financial performance. Finally, the study investigated the moderating relationship of firm specific characteristics on ERM maturity and firm financial performance.;This research study used a mixed methods approach. Both quantitative and qualitative data were collected from 134 U.S. publically traded companies using an online survey and through publically disclosed financial statement data. Simple linear regression, multivariate linear regression, hierarchical regression, and stepwise regression analysis were used to determine the association between ERM and firm financial performance. Additionally, qualitative data were coded utilizing thematic analysis in order to obtain a deeper understanding of the association between ERM and firm financial performance.;The results of this study strongly suggest that ERM adoption is not associated with financial performance and that ERM adoption alone is not sufficient to achieve the financial benefits hypothesized in the ERM literature. Additionally, the results provided little evidence that ERM maturity is associated with capital efficiency, profitability, total shareholder return, or firm value; however, the test results did provide evidence of an inverse relationship between ERM maturity and volatility. This suggests that ERM may be effectively mitigating risk for those firms willing to invest the necessary resources to mature ERM processes. The testing results for individual COSO component maturity suggested no significant association with financial performance. For organizations that determine the risk mitigation benefits provided by ERM justify the investment in an ERM implementation, this study provides some recommendations and key insights into factors that increase and decrease the effectiveness of an ERM program. Specifically, the qualitative analysis completed identified that executive leadership engagement most increased the effectiveness of an ERM program. Additionally, the factor that most decreased the effectiveness of an ERM program was lack of cultural integration. These results provide significant insights to organizations and business leaders as they determine the most effective ways to manage enterprise risks in the future. |
