Journal of Industrial and Systems Engineering

Journal of Industrial and Systems Engineering

The Impact of Enterprise Risk Management on the Financial Performance of Banks with Emphasis on Four Performance Metrics

Document Type : Research Paper

Authors
Kourosh Zarinjooei 1
hasan Ghodrati 2
Hossein Panahian 2
Hossein Jabbari 2
1 Department of Financial Engineering, Kashan Branch, Islamic Azad University, Kashan, Iran
2 Department of Accounting and Management, Kashan Branch, Islamic Azad University, Kashan, Iran
Abstract
This research examines the impact of enterprise risk management on the financial performance of banks, focusing on four performance metrics: economic value added, net profit, average cost of capital, and return on investments. To this end, linear regression analyses were conducted using data from 24 banks listed on the Tehran Stock Exchange over 10 years. The findings indicate that enterprise risk management has a positive and significant effect on the financial performance of banks, as this impact has been confirmed across the four different performance metrics, including economic value added, net profit, average cost of capital, and return on investments. Specifically, the positive coefficient of enterprise risk management in the linear regression analyses indicates its positive impact on economic value added (t-statistic 0.069), net profit (t-statistic 1.122), average cost of capital (t-statistic 0.359), and return on investments (t-statistic 0.584). Additionally, sustainability reporting has been identified as a moderating factor in these relationships, suggesting that it can enhance the positive impact of enterprise risk management on financial performance. These results emphasize the importance of effectively implementing risk management and sustainability reporting to improve the financial performance of banks listed on the Tehran Stock Exchange.
Keywords
Risk management
sustainability reporting
financial performance
Subjects
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  • Receive Date 02 April 2023
  • Revise Date 10 July 2023
  • Accept Date 19 January 2024