Quality of financial reporting and the practice of enterprise risk management: Evidence from listed United States industrial companies

This study aims to empirically investigate the impact of Enterprise Risk Management (ERM) practices on the quality of financial reporting (QFR) among U.S. industrial firms. It focuses on key ERM practice indicators such as board-level risk oversight, cash flow volatility, and value-at-risk (VaR). A static panel data approach was employed using data from 18 industrial firms registered on the New York Stock Exchange, covering the period from 2014 to 2022. The finding revealed that ERM significantly enhances the quality of financial reporting. Particularly, the board of risk management committees and VaR have a positive and significant influence on the quality of financial reporting. However, volatility in cash flows has an unfavorable and significant influence, thereby reducing the reliability of financial information disclosed by U.S industrial companies. The study’s empirical evidence can deepen prospective research by stimulating in-depth examination into the implementation of ERM, which enriches transparency and alleviates the risk related to financial reporting. It is recommended that regulatory bodies of the United States should rigorously follow the protocols of a corporate setting, COSO context, and all other legislation regarding risk management, thus preventing the dissemination of misleading accounting information and enhancing the reliability and credibility of the financial statements.