Enterprise risk management and corporate financial outcomes: empirical evidence from Indian firms

Shubhangi Bedi, Keshav Malhotra and Meena Sharma

Abstract

This study examines the impact of enterprise risk management practices on the capital structure decisions and firm performance of Indian firms listed on the Standard & Poor’s BSE 500 index. The analysis is conducted using panel data regression covering the period from 2015 to 2022. The findings suggest that firms with higher enterprise risk management disclosure scores tend to adopt more conservative capital structures, indicating lower reliance on debt financing and improved financial performance. The results imply that effective risk management enhances transparency and reduces information asymmetry, thereby influencing firm-level financing decisions. These findings offer practical insights for managers, creditors and regulators by underscoring the strategic role of enterprise risk management in shaping financial policy. The study adds to the growing body of literature on risk governance by highlighting how formal risk management practices affect financial architecture in emerging markets. To further address concerns regarding potential reverse causality between enterprise risk management adoption and financial outcomes, the study additionally employs a two-stage least squares (2SLS) instrumental variable approach, using the industry-year average enterprise risk management disclosure score as an instrument; the results of this robustness test corroborate the baseline findings.