The effect of financial risks Impulse (Enterprise Risk Management approach - ERM) and dividend policy on capital allocation efficiency by panel vector Autoregressive (PVAR) method
Quarterly Journal of Securities Exchange

Quarterly Journal of Securities Exchange

The effect of financial risks Impulse (Enterprise Risk Management approach - ERM) and dividend policy on capital allocation efficiency by panel vector Autoregressive (PVAR) method

Document Type : Original Article

Authors
1 PhD Student of Financial Management, Department of Management, Rasht Branch, Islamic Azad University, Rasht, Iran
2 Assistant Professor, Department of Business Management, Rasht Branch, Islamic Azad University, Rasht, Iran.
3 Assistant Professor, Department of Management, Rasht Branch, Islamic Azad University, Rasht, Iran Assistant Professor, Department of Accounting, Faculty of Social Sciences, Imam Khomeini International University, Qazvin, Iran
Abstract
The present study is about the effect of financial risk Impulses (based on Enterprise Risk Management-ERM) and dividend policy on the efficiency of capital allocation by PVAR method. The implementation of this research is in terms of the need to move from the traditional style of risk management to the new style (ERM); In order to manage financial risks in the form of a portfolio, the need to improve the quality of capital allocation and exploit the functions of dividend policy is important.The research method is analytical-descriptive.Data analysis of114 companies during2009-2017 using PVAR method, which is a combination of self-explanatory vector and panel data, was performed with Stata15 software.
Efficiency models of capital allocation were estimated based on two indicators: "investment inefficiency - the first model" and "investment elasticity to value-added market - the second model". According to the (IRF), the "reaction intensity" and "damping period" of the individual impulse effect of the variables in the second model are more intense and earlier than the first model and about 4 periods.According (Fevd), the most changes in both measures of capital allocation efficiency are due to these criteria and only in the first model, the share of financial risk explanation at the end of the period reaches10% to16% and the share of dividend policy to19%.As a result, in the process of capital allocation and financial risk management, firms should focus on the autoregressive process of capital allocation efficiency indicators and financial risks in the first place and in the short run.
Keywords

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