Study on Enterprise Risk Management (ERM) effect on managerial ability in order to increasing investment efficiency

This study investigates how ERM (Enterprise Risk Management) affect on relation of managerial ability and investment efficiency. According to theory, investment efficiency increase when that investment inefficiency decrease and ERM Techniques along with managerial ability increase investment efficiency and decrease investment inefficiency. Thus, the hypothesis predict that ERM Techniques play effective roles on relation between management ability and capital investment efficiency and decrease over- or under-investment. Variables include managerial ability as independent variable that measure by the methodology developed in Demerjian et al. (2012) to estimate managerial ability, and over- or under-investment as dependent variables that measure by Gan(2015) and Biddle et al. (2009). Also ERM Techniques are measure by Gordon et al (2009). The sample includes 106 Tehran Stock Exchange (TSE) firm at the period between 2004 to 2016. Findings conclude that ERM Techniques alone have no effect on relation between managerial ability and capital investment efficiency, but the study shows interactive effect between ERM Techniques including operation and reporting ERM Techniques and managerial ability can influence on capital investment efficiency.