Enterprise Risk Management, Earnings Predictability and the Cost of Debt

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dc.contributor.authorLeece, Ryan Donen
dc.contributor.committeechairMaher, John J.en
dc.contributor.committeememberBrown, Robert M.en
dc.contributor.committeememberBrozovsky, John A.en
dc.contributor.committeememberInce, Ozgur S.en
dc.contributor.committeememberOler, Mitchell J.en
dc.contributor.departmentAccounting and Information Systemsen
dc.date.accessioned2014-03-14T21:10:07Zen
dc.date.adate2012-04-02en
dc.date.available2014-03-14T21:10:07Zen
dc.date.issued2012-03-14en
dc.date.rdate2012-04-02en
dc.date.sdate2012-03-19en
dc.description.abstractThe extant academic literature considers enterprise risk management (ERM) to be the fundamental paradigm for managing the portfolio of risks confronting organizations. However, there is debate as to whether ERM actually enhances stakeholder value. This study investigates whether ERM is associated with increased earnings predictability and a lower risk of firm failure, two theoretical predications regarding ERM's impact on stakeholder value. My research utilizes the Security and Exchange Commission's (SEC) enhanced proxy statement disclosures as of February 28th, 2010 to measure ERM performance. Additionally, in order to quantify the operational construct, textual analysis is performed to develop a measure of ERM performance to be used in econometric analyses. The analyses presented in this paper investigate whether key predicted benefits of ERM are observable. Results support the proposition that ERM is associated with increased earnings predictability. Specifically, earnings and accruals are found to be more persistent for firms with better ERM performance. Additionally, analysts' earnings forecasts are more accurate in the presence of enhanced ERM performance. Results are inconclusive with regards to ERM's ability to influence the risk of firm failure during this study's sample period (i.e., 2007-2009). One explanation for this departure, the economic volatility during the financial crisis of 2008-2009, may make it difficult to empirically detect the relationship between ERM performance and the risk of firm failure.en
dc.description.degreePh. D.en
dc.identifier.otheretd-03192012-083600en
dc.identifier.sourceurlhttp://scholar.lib.vt.edu/theses/available/etd-03192012-083600/en
dc.identifier.urihttp://hdl.handle.net/10919/37506en
dc.publisherVirginia Techen
dc.relation.haspartLeece_RD_D_2012.pdfen
dc.rightsIn Copyrighten
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/en
dc.subjectTextual Analysisen
dc.subjectAnalysts' Forecastsen
dc.subjectEarnings Predictabilityen
dc.subjectRisk Managementen
dc.titleEnterprise Risk Management, Earnings Predictability and the Cost of Debten
dc.typeDissertationen
thesis.degree.disciplineAccounting and Information Systemsen
thesis.degree.grantorVirginia Polytechnic Institute and State Universityen
thesis.degree.leveldoctoralen
thesis.degree.namePh. D.en

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