How does Enterprise Risk Management Increase Firm Value?

In recent years, Enterprise risk management (ERM) has been the focus of media attention. Many organizations have implemented ERM projects, accounting firms like Ernst & young and a series of consulting companies establish departments specialize in ERM, and some university have offered ERM-related courses and research center. Although experts and executives have great interest in ERM program, there is still not sufficient experiment and corresponding research on how to influence firm value through ERM. The purpose of this study is to find out the factors that affect firm value and to explain the way that Enterprise risk management controls these factors which have an impact on firm value. In order to control the differences arising from the regulation and the differences across industries, we pay a close attention to insurance companies in China in our study. We use a framework that treated by the maximum likelihood, as well as modeling the determinants of ERM and ERM's impact on the firm value. In our study of ERM related factors, we find that some factors are positively related to ERM, such as business growth, return on capital and the diversity of the portfolio. and negative correlation, such as reinsurance and the transparency of the assets. By focusing on the listed insurance companies, we can estimate using Tobin's q theory embodies the value of a standard proxy company.