Does Corporate Governance Impact Risk Management System.docVIP

Theoretical and Applied Economics Volume XVIII (2011), No. 4(557), pp. 49-64 Does Corporate Governance Impact Risk Management System? Petre BREZEANU Bucharest Academy of Economic Studies brezeanupetre@ Mohammed Subhi Al ESSAWI Bucharest Academy of Economic Studies mod_essawy@ Dorina POANTA University of Finance and Banking, Bucharest dorina.poanta@ Leonardo BADEA University ?Valahia”, Targovi?te leobadea@ Abstract. This paper brings forth the contribution of corporate governance to risk management system at the enterprise level. The research is a complex one, integrating both quantitative and qualitative information. The quantitative information consists of balance sheet and profit and loss account data while the qualitative one includes dummy variables reflecting the agency and monitoring costs which govern the relationship between managers and shareholders. Keywords: financial performance; risk management; corporate governance. JEL Codes: G34. REL Codes: 17B.  50 Petre Brezeanu, Mohammed Subhi Al Essawi, Dorina Poanta, Leonardo Badea 1. Introduction Financial risk management has become more and more important during the last fifteen years. Globalization triggered capital market development and meanwhile the increase of the volatility which generated a high degree of incertitude at the level of the corporate segment. Capital structure and financial performance of companies are impacted to a high extent by the volatility peculiar to global financial markets, generating the development of the financial management which focuses on the main variables representing the source of risk – interest rate, foreign exchange, equity and commodity. Analysts have been preoccupied with identifying potential correlations between company’ value and financial management, especially from the perspective of scale economies. Implementing fi