Enterprise Risk Management and Firms’ Value Nexus: A Case of Saudi Emerging Market

The application of Enterprise Risk Management (ERM) practices in the companies could have a pleasant effect on the performance of firms in terms of reducing managerial and operational risks, which would also contribute positively to the firms’ value. Therefore, the present study investigates the role of applying ERM on Saudi firms’ value in Energy, Materials, and Capital Goods companies. For this purpose, data is collected from 41 companies during 2017-2020 in Energy, Materials, and Capital Goods, which are listed on the Saudi Stock Exchange. The data is collected from the annual financial reports of the companies, posted on the Saudi Stock Exchange. The statistical analysis corroborates that applying ERM contributed positively to the Saudi's Companies’ firms’ value. Moreover, the size of the audit office also improves the relationship between ERM application and firms’ value. In addition, return on assets also helps to improve firms’ value. However, the effects of firms’ size and leverage show statistically insignificant effects on firms’ value. Based on the results, the present study recommends that Saudi companies in the investigated sectors should implement the ERM practices to improve the firms’ value.