Risk Management and Value Creation

Torben Juul Andersen, Oliviero Roggi

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    Abstract

    Corporate failures, periodic recessions, regional debt crises and volatile financial markets have intensified the focus on risk management as the means to deal with turbulent conditions. The ability to respond effectively to abrupt environmental impacts is considered an important source of competitive advantage. Yet, surprisingly little research has analyzed whether the presumed advantages of effective risk management are associated with superior outcomes. Here we present a comprehensive study of risk management effectiveness and the relationship to corporate performance based on more than 33,500 observations in 3,400 firms over the turbulent 20-year period 1991-2010. Determining effective risk management as the ability to reduce earnings and cash flow volatility, we find that both have significant positive relationships to lagged performance measures after controlling for industry effects, company size and financial leverage.
    Original languageEnglish
    Publication date2012
    Number of pages19
    Publication statusPublished - 2012
    EventInternational Risk Management Conference 2012: Global Standards for Risk Measurement, Management and regulation - Rom, Italy
    Duration: 18 Jun 201219 Jun 2012
    Conference number: 5
    http://www.irmc.eu/

    Conference

    ConferenceInternational Risk Management Conference 2012
    Number5
    CountryItaly
    CityRom
    Period18/06/201219/06/2012
    Other<br/>
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    Cite this

    Andersen, T. J., & Roggi, O. (2012). Risk Management and Value Creation. Paper presented at International Risk Management Conference 2012, Rom, Italy.