Measuring and managing risk in UK listed firms

Roberts, Patrick (2016) Measuring and managing risk in UK listed firms. PhD thesis, University of Nottingham.

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Abstract

The last twenty years have seen sustained pressure on firms in the UK and globally to demonstrate good corporate governance and, in particular, to manage risk in an appropriate manner; the overall aim of this study is therefore to contribute to the understanding of how to measure and manage risk at the firm level more effectively. This involves three specific research objectives: to investigate the measurement properties of some of the most commonly used corporate risk measures; to investigate the relationship between risk and return at the firm level; and to investigate the drivers for the development of a risk management capability within firms. The research objectives were addressed in the context of UK firms, using accounting data from the FAME database and market data from Datastream. A particular criticism of previous research in these areas is the lack of consideration about how to handle extreme values in the distributions of risk measures; so a number of different techniques, specifically designed to be robust to outliers, are employed throughout this study.

The investigation of the measurement properties of a variety of corporate risk measures (Chapter Four) improves the overall understanding of what these different risk measures represent, how they are related and, crucially, that these relationships are not static but are functions of environmental uncertainty. The analysis also identifies a compact set of risk measures, relevant to specific stakeholder groups; that can be used by both researchers and practitioners. The investigation into the relationship between risk and performance (Chapter Five) finds a positive relationship between profit risk (variation in profitability) and subsequent profitability, as predicted; however, the relationship is mediated by both environmental conditions and the prior performance of the firm. The study also finds that the relationship between market risk and realised return is contingent on the overall performance of the market. Finally, the investigation into the drivers of the development of risk management capabilities (Chapter Six) provides evidence that, at least within this sample of large, listed UK firms; the desire on the part of managers to develop risk management capabilities is largely driven by traditional arguments based on protecting value for shareholders.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Diacon, Stephen R.
Amess, Kevin
Keywords: risk management, enterprise risk management, business continuity management, corporate risk management
Subjects: H Social sciences > HD Industries. Land use. Labor
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > Nottingham University Business School
Item ID: 32850
Depositing User: Roberts, Patrick
Date Deposited: 18 Jul 2016 06:40
Last Modified: 17 Sep 2016 11:57
URI: http://eprints.nottingham.ac.uk/id/eprint/32850

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