Impact of Enterprise Risk Management on Firm Performance and Value: A Panel Data Analysis of Malaysian Firms

Abstract

This study investigates the impact of enterprise risk management (ERM) implementation on firm performance and firm value among Malaysian listed companies from 2010 to 2024. Empirical evidence on ERM outcomes in the Malaysian context remains limited, particularly regarding studies that simultaneously examine financial performance and firm valuation. By jointly analyzing these measures, the study seeks to determine which performance dimension is more significantly influenced by ERM and whether Malaysian investors incorporate risk management practices into firm valuation assessments. The analysis covers 11,285 firm-year observations, using a comprehensive ERM index based on the COSO ERM framework and a fixed-effects panel regression with robust standard errors. The results indicate that ERM implementation is positively associated with both return on assets (ROA) and Tobin's Q, with a stronger relationship observed for financial performance. This suggests that, although Malaysian investors acknowledge ERM practices in their valuation decisions, ERM does not yet constitute a primary driver of firm value. These findings further support the resource-based view, indicating that ERM may function as a strategic organizational capability that contributes to sustained competitive advantage.