Market reactions to enterprise risk management adoption, incorporation by rating agencies, and ORSA Act passage

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      <subfield code="a">Prior literature on Enterprise Risk Management's (ERM) value implications focuses on costbenefit analyses of implementing an ERM program. We take a novel approach by examining the implementation dynamics and study whether the timing of firms' adoption affects ERM's value implication. We find that firms experienced positive (negative) abnormal returns when adopting ERM following (before) 2005 when Standard & Poor's (S&P) issued their ERM-related rating criteria. We also find evidence that ERM firms experienced positive abnormal market reactions to this rating criteria change by S&P but find no evidence for the following change by A.M. Best. In addition, our study documents that the market rewarded ERM adopters and penalized nonadopters after November 2011 on key dates leading to the passage of the Own Risk Solvency Assessment (ORSA) Act when there was less uncertainty regarding ultimate passage of the Act. Overall, our results imply that the capital market's view on ERM is shaped by rating agency and regulatory changes. Our findings are also consistent with the view that investors gain a greater understanding of ERM over time.</subfield>
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      <subfield code="d">Malden, MA : The American Risk and Insurance Association by Blackwell Publishing, 1999-</subfield>
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      <subfield code="g">03/05/2021 Tomo 24 Número 2 - 2021 , p. 151-180</subfield>
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