Title

Level of risk management implementation and structure-related variables: Their impact on firms' earnings per share

College

Ramon V. Del Rosario College of Business

Department/Unit

Accountancy

Document Type

Archival Material/Manuscript

Abstract

"The ultimate goal of business existence is to maximize the result of its operations thereby enhancing sustainable growth. Objectives as to increase in sales and decrease in cost and expenses are good gauge for business performance. While the focus of strategic management is to tap opportunities, risk management then sees to it that threats to these opportunities are checked. Although risk is inherent in an organization's existence, it can either paralyze a potentially successful growth strategy or, if managed properly, it can set the stage for profitable growth. In deal risk management, a prioritization process is followed whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order. In practice the process can be very difficult, and balancing between risks with a high probability of occurrence but lower loss versus a risk with high loss but lower probability of occurrence can often be mishandled". (Hitt 2006)

This study investigated to test the impact of firm's characteristics and the level of risk management implementation on firm's earnings per share. The venue was Bataan Economic Zone in the Philippines comprising of 38 manufacturing companies or 100% locators as survey participants.

Findings suggest, the use of Earnings per share as proxy variable, based on the statistical evidence from regression analysis, failed to establish significant relationship and causal link between the level of risk management implementations and EPS, of 38 companies in Bataan Economic Zone in the Philippines. Moreover, at 5%, level of significance, the level of implementation of risk management policies and guidelines, measures of risk treatments for speculative and pure risks, measures of monitoring techniques of the firms it showed no significant effect at .504%, .353%, and .165% respectively. It further identified that the variables of the study do not exert significant impact on firms' earnings per share.

In terms of structure-related variables, it showed that at 2-tailed test, the risk outlook profile variable of the companies is moderately correlated with earnings per share at 1% level of significance. The computed correlation coefficients for manufacturing industry classification nationality of owners and previous loss experience revealed a negligible negative correlation at .19, .15, and .03. However, the number of years in operation showed no correlation with earnings per share.

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Disciplines

Accounting

Keywords

Risk management; Earnings per share

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