ISSN: 2222-6990
Open access
Enterprise risk management (ERM) has emerged as an important new corporate risk management practice. The main objective of ERM is to create shareholders value and increase firm value by reducing various costs involved with highly volatile cash flows particularly to mitigate financial distress costs and underinvestment problems. However, findings of prior studies show mixed results on the ability of ERM to create value for firm. Thus, this study aimed at examining the impact of ERM implementation to maximising shareholders value which is measured by financial distress costs, underinvestment problems and firm value among Malaysian Shariah-compliant public-listed companies. This is a cross-sectional study that used quantitative methodology approach. Two types of data were gathered that are (i) primary data; through survey questionnaire and (ii) secondary data; hand-picked from firms’ annual report. Findings of this study demonstrate that ERM implementation has a significant impact to financial distress cost and underinvestment problem. However, the results do not find an impact of ERM implementation to firm value. The outcome of this study would be useful for firms to have a better understanding on the impact of ERM implementation to shareholders value where empirical findings of this study confirmed that ERM implementation is able to increase shareholders value through reduction of financial distress cost and underinvestment problem.
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In-Text Citation: (Maruhun et al., 2021)
To Cite this Article: Maruhun, E. N. S., Atan, R., Yusuf, S. N. S., Rahman, R. A., & Abdullah, W. R. W. (2021). Value Creation of Enterprise Risk Management: Evidence from Malaysian Shariah-Compliant Firms. International Journal of Academic Research in Business and Social Sciences, 11(10), 922 – 938.
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