Enterprise risk management and firm performance: A contingency perspective Lawrence A. Gordon a, * , Martin P. Loeb a , Chih-Yang Tseng b a Robert H. Smith School of Business, Van Munching Hall, University of Maryland, College Park, MD 20742-1815, United States b Department of Accounting, National Taiwan University, Taipei, Taiwan article info Keywords: Enterprise risk management Firm performance Contingency theory Management control systems abstract In recent years, a paradigm shift has occurred regarding the way organizations view risk management. Instead of looking at risk management from a silo-based perspective, the trend is to take a holistic view of risk management. This holistic approach toward managing an organization’s risk is commonly referred to as enter- prise risk management (ERM). Indeed, there is growing support for the general argument that organizations will improve their perfor- mance by employing the ERM concept. The basic argument pre- sented in this paper is that the relation between ERM and firm performance is contingent upon the appropriate match between ERM and the following five factors affecting a firm: environmental uncertainty, industry competition, firm size, firm complexity, and board of directors’ monitoring. Based on a sample of 112 US firms that disclose the implementation of their ERM activities within their 10Ks and 10Qs filed with the US Securities and Exchange Commission, empirical evidence confirms the above basic argu- ment. The implication of these findings is that firms should con- sider the implementation of an ERM system in conjunction with contextual variables surrounding the firm. Ó 2009 Elsevier Inc. All rights reserved. 1. Introduction Managing risk is a fundamental concern in today’s dynamic global environment. In recent years, however, a paradigm shift has occurred regarding the way to view risk management. Instead of looking at risk management from a silo-based perspective, the trend is to take a holistic view of risk 0278-4254/$ - see front matter Ó 2009 Elsevier Inc. All rights reserved. doi:10.1016/j.jaccpubpol.2009.06.006 * Corresponding author. Tel.: +1 301 405 2255; fax: +1 301 314 9414. E-mail address: lgordon@rhsmith.umd.edu (L.A. Gordon). J. Account. Public Policy 28 (2009) 301–327 Contents lists available at ScienceDirect J. Account. Public Policy journal homepage: www.elsevier.com/locate/jaccpubpol