Corporate governance and enterprise risk management: Evidence from SMEs

Enterprise Risk Management (ERM) has received little research attention in the context of Small and Medium Enterprises (SMEs) even though SMEs may benefit from it at least as much as large companies. This study aims to contribute to the existing literature by investigating the role of Corporate Governance (CG) in fostering (inhibiting) ERM within the SMEs context. The empirical study is based on a survey questionnaire submitted to a sample of Italian SMEs. Drawing on previous studies, a holistic measure of ERM is developed relying on risk identification, assessment, and monitoring. SMEs’ CG features are depicted in terms of ownership (family versus non-family owned business), board of directors (collective board versus sole director) and managers (presence of external versus internal managers). Main results indicate that the absence of the family ownership and the presence of a board of directors are effective drivers of the ERM development in the SMEs context whilst the presence of external managers is not significant. Additional tests focused on the single ERM components confirm the main results. The research has both theoretical and practical implications shedding light on the fundamental role played by CG features in shaping ERM practices in the SMEs context.