Enterprise risk management and economies of scale and scope: evidence from the German insurance industry

Enterprise risk management (ERM) is the approach of managing all risks faced by an enterprise in an integrated, holistic fashion. This research investigates whether the utilization of the ERM approach helps firms achieve economies of scale and scope. We use detailed survey data of German property-li...

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Bibliographic Details
Published in:Annals of operations research Vol. 299; no. 1-2; pp. 811 - 845
Main Authors: Altuntas, Muhammed, Berry-Stölzle, Thomas R., Cummins, J. David
Format: Journal Article
Language:English
Published: New York Springer US 01.04.2021
Springer
Springer Nature B.V
Subjects:
Business and Management
Business enterprises
Combinatorics
Data envelopment analysis
Diversification
Economic aspects
Economies of scale
Economies of scope
Efficiency
Enterprise risk management
Equity capital
Impact analysis
Insolvency
Insurance
Insurance companies
Insurance industry
Liability insurance
Management
Methods
Operations research
Operations Research/Decision Theory
Property and casualty insurance industry
Quality management
Research design
Revenue
Risk management
S.I.: Recent Developments in Financial Modeling and Risk Management
Scale efficiency
Target marketing
Theory of Computation
Germany
United States > US
Enterprise risk management
Economies of scale
Economies of scope
Insurance industry
Firm efficiency
ISSN:0254-5330, 1572-9338
Online Access:Get full text
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Summary:Enterprise risk management (ERM) is the approach of managing all risks faced by an enterprise in an integrated, holistic fashion. This research investigates whether the utilization of the ERM approach helps firms achieve economies of scale and scope. We use detailed survey data of German property-liability insurance companies that allows us to construct continuous measures of ERM quality. We find that ERM quality positively moderates the size-scale efficiency relationship, and we find that ERM positively moderates the diversification-revenue scope efficiency relationship, indicating that ERM facilitates economies of scale and economies of scope with respect to revenue complementarities. We do not find any evidence of economies of scope with respect to cost complementarities. Our results suggest that ERM’s impact on economies of scale and scope is one answer to the question of how ERM can create value.
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ISSN:0254-5330
1572-9338
DOI:10.1007/s10479-019-03393-x