Defense Date

Fall 9-25-2015

Degree Type


Degree Name



Business Administration

Committee Chair/First Advisor

Dana R. Hermanson

Committee Member or Co-Chair

Todd DeZoort


Jennifer Schafer


Despite the present focus in practice on enterprise risk management (ERM), academic studies have not responded to the question, “How do risk management programs (RMPs) influence the business decisions of financial professionals?” This study addresses this issue by examining the effects of RMPs on the levels of judgment conservatism and effort exercised by financial professionals. Specifically, in a 2 x 2 between-subjects experiment using experienced financial professionals as participants, I manipulated RMP type (i.e., robust or ceremonial) and financial risk level (i.e., high or low). The study examines the effect of RMP type and the interaction of RMP type and financial risk level on the degree of conservatism and effort of financial professionals’ business decisions.

A robust RMP receives strong support from senior management and board members, who then hold financial professionals accountable for the level of financial risk that they assume in making business decisions. A ceremonial RMP lacks any real or substantive management or board support, but exists primarily to provide an appearance of a functioning and regulatory compliant RMP. Risk management interview studies (Viscelli, 2013; Cohen et al., 2015) support the relevance of robust (agency theory) versus ceremonial (institutional theory) perspectives from risk management practitioners.

Contrary to prediction, no significant relationship was found between RMP type or the interaction of RMP type with the financial risk level and either the degree of financial professional judgment conservatism or effort. However, a significant relationship between the financial risk level alone and the degree of financial professional judgment effort was found. These findings remain unchanged after adding to the model various possible control variables reflecting participants’ demographics and experience. Thus, the results of this study provide no evidence that a robust versus a ceremonial RMP significantly impacts financial professionals’ decisions about whether to make project investments or the amount of time or the extent of consultation needed for them to decide. Additional analyses revealed significant relationships between RMP type or investment size and other dependent variables.

These results offer important implications for practitioners and policymakers, as well as contribute to academic research about new applications of accountability and agency theories.

Included in

Accounting Commons