Do risk management activities impact earnings volatility?

Edmonds, Christopher T.; Edmonds, Jennifer E.; Leece, Ryan D.; Vermeer, Thomas E.

doi:10.1016/j.racreg.2015.03.008

Cited by 11 publications

(13 citation statements)

References 22 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The results obtained from this test indicate that the effective implementation of ERM by the company has a negative effect on earnings volatility of the company. The results of this study are consistent with the results of research proposed by Edmonds et al [2] who find that changes in the quality of ERM implementation have a strong negative relationship with changes in earnings volatility levels. From the translation for the results of the regression hypothesis 1 above, it can be concluded if hypothesis 1 in this research is accepted.…”

Section: Results and Discussion A Descriptive Statisticssupporting

confidence: 92%

“…Akbari et al [3]found that the level of risk management effectiveness has no impact on earnings volatility. However, different results were obtained by Edmonds et al 's [8]who found that changes in the quality of ERM implementation are strongly associated with changes in earnings volatility levels. Based on these reviews, the hypothesis developed in this study are as follows: H1: There is a negative relationship between the effectiveness of ERM implementation with earnings volatility.…”

Section: B Development Of Hypothesesmentioning

confidence: 74%

“…Earnings volatility can affect the accuracy of earnings prediction for users of financial statements. Edmonds et al [2]explain the higher level of earnings volatility indicates the higher the possibility of companies experiencing financial 2 problems or financial distress. Akbari et al [3]and Edmonds et al [4]in his research explains that the proper handling and response to risk exposure through effective enterprise risk management (ERM) implementation can reduce the direct and indirect costs associated with the financial distress experienced by a company.…”

Section: Introductionmentioning

confidence: 99%

“…Previous research by Edmonds et al [8]providesempirical evidence that a company can significantly achieve lower earnings volatility by improving the quality of ERM implementation. However, different results were obtained by Akbari et al [3]found that the level of risk management effectiveness simultaneously did not affect earnings volatility.…”

Section: Introductionmentioning

confidence: 99%

“…This study investigated the role of the audit committee's effectiveness and audit quality in influencing the relationship between ERM implementation and earnings volatility, which has not much studied in previous research. Previous studies conducted by Akbari et al [10]and Edmonds et al [11]does not include internal oversight factors from audit committees and external oversight factors from independent auditors in measuring the effect of ERM on earnings volatility.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

The Analysis of Enterprise Risk Management and Earnings Volatility: Moderation of Audit Committee and Audit Quality

Ningtyas¹,

Adhariani²

2019

Proceedings of the Proceedings of the 1st Sampoerna University-Afbe International Conference, SU-AFBE 2018, 6-7 December 2018,

View full text Add to dashboard Cite

This study aims to analyze the impact of enterprise risk management (ERM) implementation on earnings volatility with audit committee effectiveness and audit quality as the moderating variables. The effectiveness of ERM implementation is assessed using a disclosure index developed based on guidance issued by COSO. Earnings volatility is measured using the standard deviation of the firm's net income before extraordinary items, divided by total assets of the company. The effectiveness of the audit committee was assessed using a checklist of audit committee effectiveness criteria, and the auditquality was measured by dummy variables (Big Four and non-Big Four). Data from a sample of companies listed on the Indonesia Stock Exchange was collected for the period 2012-2016. The results of this study indicate that the effectiveness of ERM implementation has a negative associationwith earnings volatility. The effectiveness of the audit committee is found to strengthen the association between the effectiveness of ERM implementation and earnings volatility, but audit quality was found not havinga moderating effect. This research has a practical implication on improving the role of audit quality to complement the oversight function delivered by the audit committee.

show abstract

Section: Results and Discussion A Descriptive Statisticssupporting

confidence: 92%

Section: B Development Of Hypothesesmentioning

confidence: 74%