Enterprise risk management and corporate financial outcomes: empirical evidence from Indian firms

Among 184 Indian firms on the BSE 500 (2015–2022), higher enterprise risk management disclosure scores are associated with significantly higher Tobin’s Q, indicating that more transparent risk practices are rewarded with better market valuations.Firms with higher ERM disclosure carry significantly lower debt levels, suggesting that effective risk management improves creditor confidence and access to more efficient financing.Disclosure scores rose steadily from 2015 to 2022, but remain relatively low overall, pointing to an emerging-market context where formal risk governance is still developing and offers room for improvement. This study examines the impact of enterprise risk management practices on the capital structure decisions and firm performance of Indian firms listed on the Standard & Poor’s BSE 500 index. The analysis is conducted using panel data regression covering the period from 2015 to 2022. The findings suggest that firms with higher enterprise risk management disclosure scores tend to adopt more conservative capital structures, indicating lower reliance on debt financing and improved financial performance. The results imply that effective risk management enhances transparency and reduces information asymmetry, thereby influencing firm-level financing decisions. These findings offer practical insights for managers, creditors and regulators by underscoring the strategic role of enterprise risk management in shaping financial policy. The study adds to the growing body of literature on risk governance by highlighting how formal risk management practices affect financial architecture in emerging markets. To further address concerns regarding potential reverse causality between enterprise risk management adoption and financial outcomes, the study additionally employs a two-stage least squares (2SLS) instrumental variable approach, using the industry-year average enterprise risk management disclosure score as an instrument; the results of this robustness test corroborate the baseline findings. Copyright Infopro Digital Limited. All rights reserved. You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5. If you would like to purchase additional rights please email info@risk.net Sorry, our subscription options are not loading right now Please try again later. Get in touch with our customer services team if this issue persists. New to Risk.net? View our subscription options If you already have an account, please sign in here. You already have an account with one of the websites below that uses this email address. Risk.net, FX Markets.com, WatersTechnology.com, Central Banking.com, PostOnline.co.uk, InsuranceAge.co.uk, RiskTechForum.com and Chartis-Research.com. Please use your existing password to sign in.