The Impact of Enterprise Risk Management and Sustainability Reporting on Business Performance of Listed Enterprises on Vietnam Stock Market
Main Article Content
Abstract
Enterprise Risk Management (ERM) is becoming a critical issue in the current dynamic environment where organizations have been exposed to more risks from different perspectives. Additionally, Sustainability Reporting also emerges as one of the burning topics in recent management literature. This paper examines whether ERM implementation and Sustainability Reporting could bring any effect on the business performance of Vietnamese listed companies. The paper constructs the index to measure the level of ERM implementation of listed firms in Vietnam and uses the generalized least square method (GLS) to analyze the impact of these two concerns on business performance. The regression results indicate that there are significant positive relationships between ERM as well as Sustainability Reporting and the business performance of listed companies on the Vietnam stock exchange over the period 2016-2019. The result strengthens the previous studies that companies with more sustainability disclosure and more efficient ERM implementation are likely to be better in terms of financial performance and market performance. Moreover, there is growing support for the argument that companies will improve their performance by employing the ERM concept and enhancing sustainability transparency to stakeholders.
Keywords:
ERM, Sustainability Reporting, business performance, ROA, Tobin’s Q.
References
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[51] A.Vijayakumar, P. Tamizhselvan, “Corporate Size and Profitability-An Empirical Analysis”, Journal for Bloomers of Research, 3 (1) (2010) 44-53.
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[2] N.T. Anh, “Does Risk Governance Impact CSR Disclosure? Empirical Evidence from Listed
Companies on Vietnam Stock Market,” Academy of Accounting and Financial Studies Journal, 25 (7) (2021) 1-13.
[3] H. Al-Shaer, M. Zaman, “Board Gender Diversity and Sustainability Reporting Quality,” Journal of Contemporary Accounting and Economics, 12 (3) (2016) 210-222.
[4] N.S. Bayoud, M. Kavanagh, & G. Slaughter, “Factors influencing levels of corporate social responsibility disclosure Libyan firms: A mixed study”, International Journal of Economics and Finance, 4(4) (2012), 13-29.
[5] M. S. Beasley, R. Clune, R., & D. Hermanson, “The impact of enterprise risk management on the internal audit function”.
[6] M. Beasley, D. Pagach, & R. Warr , “Information conveyed in hiring announcements of senior executives overseeing enterprise-wide risk management processes”, Journal of Accounting, Auditing & Finance, 23(3) (2008) 311-332.
[7] C. Belu, C. Manescu, “Strategic corporate social responsibility and economic performance”, Applied Economics, 45(19) (2013) 2751-2764.
[8] D.H. Blackwell, M.A.Girshick, Theory of games and statistical decision, 519 (1954), 3-53.
[9] I. Brown, A. Steen and J. Foreman, “Risk Management in Corporate Governance: A Review and Proposal”, Corporate Governance: An International Review, 17(5) (2009) 546–558
[10] I. Brown, A. Steen and J.Foreman, “Risk management in corporate governance: A review and proposal”, Corp. Gov. An Int. Rev, 17 (2009) 546–558. https://doi.org/10.1111/j.1467- 8683.2009.00763.x
[11] P.M. Clarkson, Y. Li, G.D. Richardson and F.P. Vasvari, “Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis”, Accounting, organizations and society, 33(4-5) (2008) 303-327.
[12] COSO, Enterprise Risk Management Framework, Committee of Sponsoring Organizations of the Treadway Commission [online] http://www.erm.coso.org, (2004) (Accessed 11th January 2019).
[13] COSO , Enterprise Risk Management Integrating with Strategy and Performance, Committee of Sponsoring Organizations of the Treadway Commission, (2017). –10 [online] http://www.erm.coso.org. (Accessed 11 January 2019).
[14] H. B.Christensen, L. Hail, & C. Leuz, “Adoption of CSR and sustainability reporting standards: Economic analysis and review”, European Corporate Governance Institute-Finance, Working Paper, (2019) (623).
[15] K. Desender, “On the Determinants of Enterprise Risk Management Implementation”, Enterprise IT Governance, Business Value and Performance Measurement, (2007). 10.4018/978-1-60566-346-3.ch006.
[16] M. Dooms, “Stakeholder management for port sustainability: moving from ad-hoc to structural approaches”, Green ports, (2019) (63-84)..
[17] M. Farrell, R. Gallagher, The Valuation Implıcations of Enterprise Risk Management Maturity. The Journal of Risk and Insurance, 823 (2015) 625-657.
[18] S. Fitriana, R. Wardhani, “The effect of enterprise risk management and sustainability reporting quality on performance: evidence from Southeast Asia countries”, Int. J. Economic Policy in Emerging Economies, (4) (2020) 345-347.
[19] H.K. Frank , “Risk, Uncertainty and Profit. University of Illinois at Urbana-Champaign's”, Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship.
[20] M. Freedman, B. Jaggi, “An analysis of the association between pollution disclosure and economic performance”, Accounting, Auditing & Accountability Journal, 1(2) (1988) 43-58.
[21] G. Gandellini, A.Pezzi, & D.Venanzi,Financial Performance and Sustainability of Strategy. SpringerBriefs in Business, 127 (2013) 101-117.
[22] S. Gates, J. L. Nicolas & P.L. Walker, “Enterprise risk management: A process for enhanced management and improved performance”, Management accounting quarterly, 13(3) (2012) 28-38.
[23] L. A.Gordon, M. P. Loeb, & C. Y. Tseng, “Enterprise risk management and firm performance: A contingency perspective”, Journal of accounting and public policy, 28(4) (2009) 301-327.
[24] GRI, GRI standards (2016), at https://www.globalreporting.org/how-to-use-the-gri-standards/gri-standards-english-language/.
[25] O. A.Hassan, C. Marston, “Disclosure Measurement in the Empirical Accounting Literature-A Review Article”, International Journal of Accounting, (2019).
[26] P. Hopkin, Fundamentals of Risk Management: Understanding, Evaluating and Implementing Effective Risk Management. Kogan Page Publishers, London (2012).
[27] R.E. Hoyt, A.P. Liebenberg, “The value of enterprise risk management”, The Journal of Risk and Insurance, i (4) (2011) 795–820.
[28] M. C.Jensen, W. H. Meckling, “Theory of the firm: Managerial behavior, agency costs and ownership structure”, Journal of Financial Economics, 3 (1976) 305–360. doi:10.1016/0304-405X(76)90026-X
[29] R. L.Kimbrough, P. J. Componation, “The relationship between organizational culture and enterprise risk management”, Engineering Management Journal, 21(2) (2009) 18-26.
[30] V. Kraus, O. M. Lehner, “The nexus of enterprise risk management and value creation: A systematic literature”, Proceedings in Finance and Risk Perspectives, 12 (2012) 121.
[31] P. Lechner, N. Gatzert, “Determinants and value of enterprise risk management: empirical evidence from Germany”, The European Journal of Finance, i (10) (2018) 867–887.
[32] J.Lee, “Does Size Matter in Firm Performance? Evidence from US Public Firms”, Int. J. of the Economics of Business, 16 (2) (2009) 189 – 203.
[33] A. P.Liebenberg, R. E. Hoyt, “The determinants of enterprise risk management: Evidence from the appointment of chief risk officers”, Risk management and insurance review, 6(1) (2003) 37-52.
[34] S. A. Lundqvist, “An exploratory study of enterprise risk management: Pillars of ERM”, Journal of Accounting, Auditing & Finance, 29(3) (2014) 393-429.
[35] L. S. Mahoney, L. Thorn, “An examination of the structure of executive compensation and corporate social responsibility: A Canadian investigation”, Journal of Business Ethics, 69(2) (2006) 149-162.
[36] M. F.Malik, M. Zaman, & S. Buckby, “Enterprise risk management and firm performance: Role of the risk committee”, Journal of Contemporary Accounting & Economics, 16(1) (2020) 100-178.
[37] M. K.McShane, A. Nair & E. Rustambekov, “Does Enterprise Risk Management Increase firm Value?”, Journal of Accounting, Auditing & Finance, 26 (14) (2011) 641-658
[38] A.Mikes, R. S. Kaplan, “Towards a contingency theory of enterprise risk management”, (2014).
[39] J. M. Moneva, E. Ortas, . Are stock markets influenced by sustainability matter? Evidence from European companies. International Journal of Sustainable Economy, 1(1) (2008) 1-16.
[40] T.Ong, T. Trireksani, T., H. G. Djajadikerta, “Hard and soft sustainability disclosures: Australia’s resources industry”, Accounting research journal, (2016).
[41] D.Pagach, R. Warr, “The characteristics of firms that hire chief risk officers”, The Journal of Risk and Insurance, 78 (1) (2011) 185–211.
[42] M. L. Pajuelo, “Assessment of the impact of business activity in sustainability terms. Empirical confirmation of its determination in Spanish companies”, Sustainability, 5(6) (2013) 2389-2420.
[43] T.Phan, H.Tran, & T. Le, “The Relationship between Sustainable Development Practices and Financial Performance: A Case Study of Textile Firms in Vietnam”, (2020) 3-15.
[44] M. Salim, R. Yadav, “Capital Structure and Firm Performance: Evidence from Malaysian Listed Companies”, Procedia-Social and Behavioral Sciences, 65 (2012) 156-166.
[45] L. Seoki, “Effects of Capital Intensity on Firm Performance: The U.S. Restaurant Industry”, The Journal of Hospitality Financial Management, 18 (1) (2010) 1-13.
[46] Shad, M., & Lai, F. (2019). Integrating Sustainability Reporting into Enterprise Risk Management and its Relationship with Business Performance: A Conceptual Framework. Journal of Cleaner Production, 4-15.
[47] J. Sithipolvanichgul, “Enterprise Risk Management and Firm Performance: Developing Risk Management Measurement in Accounting Practice”, The University of Edinburgh (2016).
[48] J. Sithipolvanichgul, Enterprise risk management and firm performance: developing risk management measurement in accounting practice (Doctoral dissertation, University of Edinburgh) (2016).
[49] T. F. Slaper, T. J. Hall, “The triple bottom line: What is it and how does it work”, Indiana business review, 86(1) (2011) 4-8.
[50] C.Smithson, B. J. Simkins, “Does risk management add value? A survey of the evidence”, Journal of applied corporate finance, 17(3) (2005) 8-17.
[51] A.Vijayakumar, P. Tamizhselvan, “Corporate Size and Profitability-An Empirical Analysis”, Journal for Bloomers of Research, 3 (1) (2010) 44-53.
[52] A. Wirawan, “The Effect of Corporate Social Responsibility on the Firm Value with Risk Management as a Moderating Variable”, Journal of Asia-Pacific Business, (2020).
[53] World Bank, Doing business in Vietnam, (2020) at https://www.doingbusiness.org/content/dam/doingBusiness/country/v/vietnam/VNM.pdf
[54] World Bank, GRI Index 2017, Washington, DC. (2017), at https://openknowledge.worldbank.org/handle/10986/28429 License: CC BY 3.0 IGO.”
[55] M. Zahid, Z. Ghazali, “Corporate sustainability practices among Malaysian REITs andproperty listed companies”, World Journal of Science, Technology and Sustainable Development, 12 (2) (2015) 100-118.