Management of Risks in Nigerian Firms: Evidence from Service Firms
Keywords:
Risk committee, Firm performance, Risk committee independence, Risk committee gender diversity
Abstract
This paper examined the effect risk management has on the performance of service firms in Nigeria. The ex-post facto research design was used to carry out this study. The study sample was drawn from oil-servicing companies whose stocks were traded on the floor of the Nigerian Exchange Group as at December 31, 2020. The data was derived from the annual reports and accounts of these firms from 2010-2020. The Pearson correlation matrix and the Ordinary Least Square (OLS) model, with a fixed and random effect, were used to analyse the data. The results indicate that the management of risk has a huge and statistically significant impact on the performance of service firms in Nigeria. Consequently, for service firms to increase their performance, they need to have more females on the risk committee, as well as make their risk committee more independent than ever before. More so, management needs to develop a well-structured risk management framework capable of increasing the performance of the firm.
References
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2. Anton, S.G. (2018). The impact of enterprise risk management on firm value: Empirical evidence from Romanian non-financial firms. Inzinerine Ekonomika-Engineering Economics, 29(2), 151-157
3. Augustina, L. & Baroroh, N.(2016).The relationship between enterprise risk management (ERM) and firm value mediated through the financial performance. Review of Integrative Business and Economics Research, 5(1), 128-138
4. Committee of Sponsoring Organizations of the Treadway Commission (COSO) Report (2004) Enterprise risk management-integrated framework, executive summary. COSO, September.
5. Danisman, G.O. & Demirel, P. (2019). Corporate risk management practices and firm value in an emerging market: A mixed methods approach. Risk Management, 21, 19-47. https:// doi.org/10.1057/s41283-018-0040-5
6. Erin, O. & Aribaba, F. (2021).Risk governance and firm value: Exploring the hierarchical regression method. Afro-Asian Journal Finance and Accounting, 11(1), 104-130.
7. Faisal, M. & Hassan, N.N. (2020).Enterprise risk management and firm value: The case in emerging market. International Journal of Innovation, Creativity and Change, 11(6), 272-286
8. Gonzalez, L.O., Santomil, P.D. & Herrera, A.T. (2020).The effect of enterprise risk management on the risk and the performance of Spanish listed companies. European Research on Management and Business Economics, 26, 111-120.
9. Horvey, S.S. & Ankamah, J. (2020). Enterprise risk management and firm performance: Empirical evidence from Ghana equity market. Cogent Economics and Finance, 8(1), 1-22 doi: 10.1080/23322039.2020.1840102
10. Husaini, R. &Saiful, H. (2017). Enterprise risk management, corporate governance and firm value: Empirical evidence from Indonesian public listed companies. International Journal of Advances in Management and Economics, 6(6), 16-23.
11. Jensen, M.C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76(2), 323-329.
12. Jesko, S. & Sophie, H. (2018).Company risk management in light of the sustainability transition. Journal of Sustainability, 10(4), 2-25
13. Mayers, D. & Smith, C.W., Jr. (1987).Corporate insurance and the underinvestment problem. The Journal of Risk and Insurance, 54(1), 45–54. https://doi.org/10. 2307/252881
14. Okoro, G.E. & Ihenyen, C.J. (2020).Does earnings management exert pressure on firms’ return on assets and equity? The case of sub-Saharan Africa. Economic Horizons, 22(3), 207-218
15. Sekerci, N. & Pagach, D. (2020).Firm ownership and enterprise risk management implementation: Evidence from the Nordic region. Journal of Risk and Financial Management 13, 1-21 doi:10.3390/jrfm13090210
16. Şenol, Z., Karaca, S.S. & Erdoğan, S., (2017). The effects of financial risk management on firm’s value: An empirical evidence from Borsa Istanbul Stock Exchange. Studii Financiare,Centre of Financial and Monetary Research "Victor Slavescu", 21(4), 27-45.
17. Smith, C.W. &Stulz, R.M. (1985).The determinants of firms’ hedging policies. Journal of Financial and Quantitative Analysis, 20(4), 391–405. https://doi.org/ 10.2307/2330757Viscelli
18. Waitherero, F., Wanyoike, M.S. & Muriu, M.S. (2019). Interaction between financial risk management and firm value of the firm among private equity firms in frontier markets: A theoretical perspective. Journal of Accounting, Finance and Auditing Studies, 5(3), 30-41
Published
2022-03-15
How to Cite
Jeol , I. C., & Topman, S. P. (2022). Management of Risks in Nigerian Firms: Evidence from Service Firms. Central Asian Journal of Innovations on Tourism Management and Finance, 3(3), 13-20. Retrieved from https://cajitmf.centralasianstudies.org/index.php/CAJITMF/article/view/208
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