Enterprise Risk Management Practices and Banks Value: Moderating Effect of Industry Competition

Abstract

The study examines the moderating effect of industry competition on the relationship between Enterprise Risk Management (ERM) practices and Value of Firm. Secondary data were sourced from the Annual financial reports of 13 banks out of 16 banks listed by the Nigerian Stock Exchange (NSE) for the period of 2015 to 2019. The data were analyzed using Ordinary Least Square regression with robust standard errors. The results indicate that ERM operation objective has a significant positive effect on firm value, while strategy objective inversely affects value. Both reporting and compliance objectives have insignificant effect on firm value. In addition, the relationship between all the ERM objectives and bank value are moderated by industry competition. The study recommends among others things that regulators of Nigerian banks such as the Central Bank of Nigeria, and Securities’ and Exchange Commission should see the need for strengthening of operation objective as a pressing priority and a more extensive publicity as it improves the value of listed commercial banks in Nigeria. The study is of benefits to regulators, Banks, investors, shareholders and other practitioners in understanding how ERM practices effectively influence firm value.