Giorgio Stefano Bertinetti

The Effect of the Enterprise Risk Management Implementation on the Firm Value of European Companies

We aim to investigate the impact of the adoption of an Enterprise Risk Management (ERM) system on the enterprise value and to discover which are the determinants of this choice. Several economic actors have decided to face the current economic and financial complexity shifting from a Traditional silo-based Risk Management approach (TRM) to a more comprehensive one, the so called Enterprise Risk Management (ERM). Some academics have tried to investigate the effects of the ERM implementation on firm value, mainly focusing on the financial industry. The results are still controversial. Moreover, there is no empirical evidence about the adoption of ERM programs among non-financial companies. The aim of our study is double: first, we try to understand if the ERM implementation affects firm value on a sample of 200 European companies, belonging to both financial and non-financial industries; second, we test which are the determinants of the adoption of an ERM system. We do this performing a fixed effects panel regression analysis (goal 1) and a fixed effects logistic analysis (goal 2). We find a positive statistically significant relation between the ERM adoption and firm value. As for the probability that a firm engages in an ERM protocol, we find that size, the company beta and profitability (ROA) are the statistically significant determinants.

Enterprise Risk Management and Integrated Reporting: Is There a Synergism?

Integrated Reporting (IR) and Enterprise Risk Management (ERM) are two ways that have to converge into the “integrated thinking” approach, as both of them push towards a new long-termism in management decisions. Risk management aims to protect company value, this way making the business sustainable over time; so risk issues should be well considered into the integrated report and, in the meantime, company providing the integrated report should demand for the existence of an ERM. Analyzing the companies of the IIRC Pilot Programme we find that: the number of companies filling the IR and contemporaneously adopting the ERM is increasing over time. However, shifting from the traditional to the integrated report doesn’t imply a simultaneous adjustment to an integrated risk management, but when both approaches are present companies have higher performances with respect to those that only do the IR. This evidence supports the hypothesis that ERM can be useful to make the integrated thinking effective.

Is There (a Methodology to Measure) a Corporate Governance Risk Premium into the Corporate Cost of Capital

The paper proposes to intend the firm as a nexus of stakeholder, each bearing return-to-risk expectations on the overall corporate performance. All stakeholders must achieve their own satisfaction by bargaining contracts that must be sustainable, i.e. keep alive in the long term both the firm and its stakeholders-network. Governance is intended as the mechanism that gives solution to the above puzzle. When market and contracts are complete, optimal solution can be easily found out. But when incompleteness emerges, governance can misallocate the firm performance between the stakeholders. Accordingly, the stakeholders will negotiate the visible-only arguments of contracts, and, this way, they bind even the invisible ones (i.e. those impacting anyway on their ex-post performance). This being the case, a Governance Risk Premium (GRP) emerges and incentivize a governance repackage. Such a GRP depends both on the actual grade of incompleteness of the financial markets but even on the one of the contracts as per their capability to allocate risk and growth through time. A framework to detect GRP is even proposed here. Its affordability is proved through an application to the Italian case which is characterized by 142bp GRP inside the cost of equity capital