Abstract

The paradigm shift from traditional risk management that is ‘silo-based’ to Enterprise-wide risk management has elicited studies by scholars on the possible value creation capability of this new approach. But these studies, most of which have been conducted in the financial services sector, yielded mixed results. It is in the light of this ambiguity that this study examined the association between corporate risk management (CRM) and firm value (proxied by Tobin’s Q). The sample consisted of 10 manufacturing companies drawn from different sub-sectors of manufacturing companies listed on the Nigerian Stock Exchange as at 31 December 2012. The period of study is 11 years (2002 – 2012). Data on CRM and other determinants of firm value viz. firm size (SIZE), profitability (ROA), thin capitalization (TINCAP) and ownership concentration (OWNCON), were drawn from the published annual reports and accounts of the sampled companies. Pearson correlation and OLS regression were employed in the analysis of data. Results indicated weak association between CRM and firm value (R = 0.3045). The isolated effect of CRM on firm value was positive and significant (β1= 0.6918; P-value = 0.001) but when considered jointly with other firm-value determinant factors, its effect became insignificant (β1 = 0.378; P-value = 0.079). SIZE and ROA exerted significant positive effects on firm value while TINCAP and OWNCON exerted negative and insignificant effects on firm value. The Adjusted R2 values were not sufficiently strong in explaining the variations in firm value. The study concluded that the state of ERM appears to be relatively immature and that manufacturing companies in Nigeria are yet to embrace integrated risk management. The study recommended the adoption and incorporation of CRM as an integral part of Nigerian manufacturing companies’ corporate strategy.