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Information Conveyed in Hiring Announcements of
Senior Executives Overseeing Enterprise-Wide Risk Management Processes
Mark S Beasley, North Carolina State
Donald P Pagach, North Carolina State University
Richard A Warr,
ABSTRACT. Enterprise risk management (ERM) is the process of analyzing the portfolio of risks facing the enterprise to ensure that the combined effect of such risks is within an acceptable tolerance. This study examines equity market reactions to announcements of appointments of senior executive officers overseeing the enterprise’s risk management processes. Based on a sample of 120 announcements, we find the average two-day market response is not significant, suggesting that a definitive statement about the benefit or cost of implementing ERM is not possible. However, further analysis reveals that market responses to such appointments are significantly positively associated with a firm’s size and prior earnings volatility, and negatively associated with the amount of cash on hand relative to liabilities and leverage. These results are confined to non-financial firms, possibly be due to the regulatory requirements for enterprise risk management that already exist for financial firms.
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