Effect of enterprise risk management and corporate governance mechanisms on firm performance: Evidence from listed companies in Indonesia

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This study aims to assess the influence of enterprise risk management and corporate governance mechanisms on companies’ financial and market performance. This study’s population is all companies registered on the Indonesia Stock Exchange in 2019. The purposive sampling method was used to select 664 listed companies to obtain a total sample of 242 companies. This study used a quantitative approach and analyzed data using Partial Least Square (PLS). The results showed that enterprise risk management (p < 0.01; β = 0.28) and corporate governance mechanisms (p = 0.01; β = 0.14) affect company financial performance. Enterprise risk management (p < 0.01; β = 0.16) affects company market performance, but corporate governance mechanisms (p = 0.24; β = 0.05) do not affect company market performance. This paper gives stakeholders a better understanding of the relationship between enterprise risk management, corporate governance, financial performance, and corporate market performance; consequently, it can serve as a resource for decision-making. For management, these results can be used as a guideline for taking appropriate steps in managing risk and implementing corporate governance to improve the company’s financial and market performance.

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    • Figure 1. Path analysis model
    • Table 1. Research sample
    • Table 2. Descriptive statistics
    • Table 3. Correlation among latent variables with square roots of AVEs
    • Table 4. PLS path analysis coefficient results
    • Conceptualization
      Rita Anugerah, Ria Nelly Sari
    • Data curation
      Rita Anugerah, Nadila Rizki Ariyanto
    • Formal Analysis
      Rita Anugerah, Nadila Rizki Ariyanto, Ria Nelly Sari
    • Funding acquisition
      Rita Anugerah
    • Investigation
      Rita Anugerah, Nadila Rizki Ariyanto
    • Methodology
      Rita Anugerah, Nadila Rizki Ariyanto, Ria Nelly Sari
    • Project administration
      Rita Anugerah, Nadila Rizki Ariyanto, Ria Nelly Sari
    • Resources
      Rita Anugerah, Nadila Rizki Ariyanto, Ria Nelly Sari
    • Supervision
      Rita Anugerah, Ria Nelly Sari
    • Validation
      Rita Anugerah, Nadila Rizki Ariyanto, Ria Nelly Sari
    • Visualization
      Rita Anugerah, Nadila Rizki Ariyanto, Ria Nelly Sari
    • Writing – original draft
      Rita Anugerah, Nadila Rizki Ariyanto
    • Writing – review & editing
      Rita Anugerah, Ria Nelly Sari
    • Software
      Nadila Rizki Ariyanto