Does ERM Sophistication Drive IPO Initial Performance in Emerging Market? Evidence from Malaysian Market

The escalation of complexity and multidimensional (internal and external) factors bring companies to a position where risk management should be of main concern. Enterprise Risk Management (ERM) adoption and the extent of ERM implementation is seen as a guaranteeing element to increase the value of the companies over the long term due to adequate risk awareness and risk management strategies in all relevant business functions. This study examines the extent of ERM implementation on the initial performance of companies in the Malaysian IPO market. Testing a sample of 105 Malaysian IPOs issued from January 2012 to December 2020 using a linear regression model, ERM sophistication is positively and significantly related to the initial performance of Malaysian IPOs, offering support to the proposition in this study. Equally important is the reciprocal of offer price, subscription ratio, and market condition, which are also significant factors in companies’ post-IPO performance. This study benefits the market regulators and investors on the importance of ERM sophistication to companies’ initial performance.