Enterprise risk management in private firms: Does ownership structure matter?

Private firms adopt Enterprise Risk Management (ERM) practices voluntarily. Using results of a survey that involved 78 respondents, we investigate the adoption of ERM practices in Italian private corporations and question whether ERM adoption is affected by the ownership structure of the firm. We find that agency conflicts between controlling and minority shareholders, which arise when ownership dispersion decreases, affect ERM adoption, and that when proprietorship is more dispersed, the firm places more focus on ERM projects. Additionally, we document the different roles of different types of owners. More specifically, in line with the patronage agency theory, the government-controlled enterprises undergo more intense ERM, whereas, in line with behavioral agency theory, individual and family-controlled firms pay less attention to ERM adoption.