ENTERPRISE RISK MANAGEMENT AND ANALYSTS' FORECASTS: EVIDENCE FROM INSURANCE COMPANIES

Mahmud Hossain ； Feras Salama ； Santanu Mitra

《Advances in Quantitative Analysis of Finance and Accounting》 17期 (2019/12) Pp. 1-27

https://doi.org/10.6293/AQAFA.201912_(17).0001

摘要

In recent years organizations have been exposed to a wider scope of risks resulting from such factors as global diversification and industry consolidation. Consequently, there is pressure on firms to implement a more sophisticated risk management system that goes beyond managing individual risks in isolation. Enterprise risk management (ERM) emerged to overcome the limitations of the traditional, silo-based risk management approach by focusing on a portfolio of risks, which increases the awareness of all sources of risk and decreases the likelihood that some risks get overmanaged while other risks get undermanaged. While potential benefits of ERM have been espoused, the findings are mixed, and there is a demand for research investigating the benefits of ERM. This paper provides evidence that ERM affects analysts' forecast properties. Specifically, based on a sample of U.S. property-casualty (PC) insurance companies and using Standard and Poor's newly available risk management rating, we document that a firm's ERM score positively (negatively) affects analysts' earnings forecast accuracy (dispersion). These results highlight the importance of ERM in improving financial analysts' information environment.

關鍵字

Analysts' Forecasts ； Enterprise Risk Management ； Property - Casualty Insurance

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