Enterprise Risk Management and Performance of Johannesburg Stock Exchange Companies: Does Size Really Matter?

Abstract

This investigation aims to assess the influence Enterprise Risk Management (ERM) has on the performance of financial and non-financial organisations on the Johannesburg Stock Exchange (JSE) as well as the moderating role of firm size on the relationship. This research considers 100 listed companies which consists of 50 financial and 50 non-financial companies on the JSE. The generalised method of moments is used to test the link between ERM and performance of financial and non-financial organisations on the JSE and to test the moderating role of firm size on the ERM-firm performance relationship. ERM was measured using nine risk management features and firm size was analysed using the lagged total assets of each firm. ROA and ROE were the basis of measure for firm performance. The study revealed a positive relationship exists between ERM and firm performance for financial and non-financial firms. The results are consistent with the two performance indicators. In addition, the results reveal firm size positively and significantly moderated the ERM-performance relationship. This suggests that large firms mostly to adopt ERM due to economies of scale and may have enough resources to make certain of the effective implementation of ERM system, thereby enhancing their performance.