The Effect of Risk Management on Firm Financial Performance

This study examines the effect of risk management on financial performance of listed firms on the Indonesia Stock Exchange year 2015-2016. We have total sample of 710 observations. This study uses three variables as a proxy of risk management: the appointment of Chief Risk Officer, the establishment of risk management committee, and the financial competence of the Chief Executive Officer and to measure financial performance we use return on asset (accounting-based measure) and price-to-book value (market-based measure). The results of this study show that the appointment of Chief Risk Officer and the establishment of the risk management committee has no significant effect on both measures of financial performance, while the financial competence of the Chief Executive Officer has a significant positive effect on the firm market financial performance.