An Exploratory Study on Value Relevance of the Enterprise Risk Management (ERM) Disclosure Practices toward Firm Value: Evidence from the United Arab Emirates

Abstract

The objective of this study is to explore the status of ERM Disclosure Practices in the UAE and the extent to which its relevance to firm value. This study offers some discussion on the evolution of methodologies used in the literature that lead to the use of textual analysis. Six ERM disclosure scores were developed based on COSO and ISO31000 risk management frameworks. Top 25 companies based on market capitalization were selected from ADX and DFM. The 50 annual reports of 2018 were analyzed using the NVIVO12 text search feature. It was found that the use of raw disclosure scores or indexed scores for COSO, ISO31000 or combined generated similar results. The results revealed that there were no significant differences in the ERM Disclosure Practices between financial and non-financial companies. Total assets were found to have a significant direct association toward ERM Disclosure Practices. The ERM Disclosure Practices affirm its relevance toward firm value via a statistically significant relationship. The study emphasizes a few contributions to future studies and managerial implications.