ENTERPRISE RISK MANAGEMENT (ERM) AND FIRM’S PERFORMANCE: STUDY OF SELECTED MANUFACTURING FIRMS ON NIGERIAN STOCK EXCHANGE

Adegbola Olubukola Otekunrin’; Tony, Ikechukwu Nwanji; Adebanjo Joseph Falaye; Babatunde Taiwo Adesina; Babatunde Taiwo Adesina; Frank Dayo Awonusi; Eseosa David Obadiar; Samuel Abiodun Ajayi; & Damilola Felix Eluyela

Department of Accounting and Finance,

Landmark University, Omu-Aran, Kwara State, Nigeria:

Email: otekunrin.adegbola@lmu.edu.ng, nwanji.tony@lmu.edu.ng; falaye.adebanjo@lmu.edu.ng , Adesina.babatunde@lmu.edu.ng; awonusi.frank@lmu.edu.ng; obadiaru.eseosa@lmu.edu.ng;  ajayi.abiodun@lmu.edu.ng; eluyela.damilola@lmu.edu.ng

ABSTRACT

The contemporary business environment is embroiled with enterprise risks which can have a negative impact on an organizations existence and success. These risks represent the threats to the ability of an enterprise to execute business process and create customer value. This study was carried out to find out whether the management of these integrated risks through enterprise risk management (ERM) can lead to better firm’s performance in Nigerian manufacturing In line with extant researches in this area, the proxy used for performance of firms in this study is profitability and it is measured by firm’ return on equity ratio (Lo, 2003; Hossein & and Mahdi, 2009). Descriptive research design was adopted in this study. The secondary data used were taken from the annual reports of the selected manufacturing firms. Random sampling technique was used for selecting firms for this study. The study revealed that practice of ERM is positively and significantly related to firm’s performance proxied by profitability and measured by the level of return on equity (ROE). The study also revealed lliquidity level of a firm which is proxied by current ratio (CR) is positively and significantly related to the level of return on equity (ROE). Leverage level proxied by debt to total equity ratio of a firm is negatively and significantly related to the level of return on equity (ROE). Finally solvency level proxied by debt to total asset ratio of a firm is negatively and significantly related to the level of return on equity (ROE). It is recommended that the manufacturing sector should adopt ERM practice in order to enhance firm performance and by extension increases organization’s reputation.Keywords: Enterprise, Risk, Profitability, Leverage, Solvency