Does Corporate Risk Management Increase The Value of a Firm? Evidence from Quoted Nigerian Oil and Gas Companies

  • Vincent Ivwighrevero Oruwevwiruohwo Odiri, Emmanuel Ejiroghene Aruoren Edesiri, Godsday Okoro

Abstract

The prime aim of this study is to assess whether certain corporate risk management components affect firm value using three disaggregated corporate risk management and firm value models. By employing panel data analysis technique and fixed and random effect models involving 79 observations of 13 oil and gas companies quoted on the Nigerian Stock Exchange (NSE) from 2010-2019, the study found evidence that inactive corporate risk management leads to decrease firm value.  The main outcome of the research demonstrates that corporate risk management does not increase firm value. In addition, we found that CRM components such as risk committee independence and risk committee meetings negatively relate to one firm value metric-TobinQ. For companies to increase firm value via the instrumentality of CRM, there is a need for management to develop a well-structured CRM framework towards increasing firm value; this can be done by increasing the numbers of risk committee meetings, risk committee independence and diversity of risk committee.

Published
2021-01-31
Section
Articles