How Does Culture Influence Firm Risk Taking?

This study examines the effect of board diversity on risk-taking for tourism firms and analyzes the moderating effect of board independence, CEO duality, and free cash flows in this proposed relationship. Using a composite index of board diversity and a sample of tourism firms from the US hotel, restaurant, and airline industries, we find that greater board diversity leads to lower risk-taking, measured in standard deviation of return on assets. Moreover, we report that the risk-reduction effect of board diversity is more profound when tourism firms have less board independence and less free cash flows for investments. When board diversity is decomposed into relation-oriented and task-oriented diversity attributes, we find that only the task-oriented diversity is influential in reducing firm risk-taking for tourism firms. Akin to main analysis, the board independence and free cash flows are significant moderators of the relationship between task-oriented diversity and firm risk-taking.

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The Influence of CEO Characteristics on Firm Risk-taking: Evidence from UK SMEs

Studies of Applied Economics ◽

10.25115/eea.v39i8.4509 ◽

2021 ◽

Vol 39 (8) ◽

Author(s):

Hafiz Muhammad Zia-ul-haq ◽

Saba Ameer

Keyword(s):

Risk Taking ◽

El Paso ◽

Firm Risk ◽

Toma De Decisiones ◽

Para Determinar ◽

Ceo Characteristics

La exposición al riesgo de la empresa sigue siendo motivo de preocupación para los investigadores y los inversores. Se cree que la propensión a asumir riesgos de la empresa es un reflejo de los rasgos y características personales de la alta dirección. Por lo tanto, es fundamental explorar la relación entre varias características de la alta dirección y la propensión de la empresa a asumir riesgos. Esta investigación proporciona evidencia empírica del Reino Unido sobre las relaciones entre la edad, el mandato, la educación y la conexión política del CEO con la toma de riesgos de la empresa. Se emplean varias técnicas de estimación para determinar la idoneidad de los resultados. El estudio informa una asociación significativa de las características del CEO con el comportamiento de toma de riesgos de la empresa. Específicamente, se informa que la antigüedad y el mandato a largo plazo del CEO tienen una influencia negativa en la toma de riesgos de la empresa, mientras que los CEO la participación política y la educación influyen positivamente en el riesgo de la empresa. Con base en los hallazgos dados, se da a entender que, con el paso del tiempo, los ejecutivos comienzan a limitar sus perspectivas al pasar por alto la información y las oportunidades dadas. Por lo tanto, esta mentalidad estrecha los restringe a tomar más riesgos. Por lo tanto, tomar decisiones menos riesgosas en la vejez y con una antigüedad más larga.Por el contrario, la formación superior de los directores ejecutivos mejora su base de conocimientos y sus habilidades analíticas, lo que una vez mejora positivamente su toma de decisiones estratégicas y se sienten más motivados para tomar decisiones arriesgadas. Esta investigación también destaca la importancia de la conexión política, que es una fuente de poder y seguridad que fortalece el control de los directores ejecutivos sobre la empresa. Por lo tanto, los CEO con conexiones políticas toman decisiones más arriesgadas en comparación con sus contrapartes no políticas.

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Firm Risk and Proxy Fights: Evidence from SOX

Accounting and Finance Research ◽

10.5430/afr.v7n2p96 ◽

2018 ◽

Vol 7 (2) ◽

pp. 96

Author(s):

Fang Chen ◽

Jian Huang ◽

Han Yu

Keyword(s):

Risk Taking ◽

Idiosyncratic Risk ◽

Total Risk ◽

Firm Risk ◽

Exogenous Shock ◽

Sarbanes Oxley ◽

Proxy Fights

The Sarbanes Oxley Act of 2002 (SOX) is documented to curb executive risk-taking and firm risk. Utilizing SOX as an exogenous shock on firm risk, we find that proxy fight threats are positively related to a firm’s total risk and idiosyncratic risk. Specifically, although firm risk generally decreases post-SOX, high proxy fight threats mitigate this change in firm risk. We also find that although firms adopt more conservative policies such as decreasing their leverage and payout post-SOX, these changes are mitigated by proxy fight threats. In sum, our findings indicate that proxy fights act as an external disciplinary mechanism, encourage executive risk-taking, and increase firm risk.

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Do Managerial Ability Impact Indonesian Firm Risk-Taking Behavior?

AKRUAL Jurnal Akuntansi ◽

10.26740/jaj.v12n1.p18-33 ◽

2020 ◽

Vol 12 (1) ◽

pp. 18

Author(s):

Emiliya Rahma Wati ◽

Heru Tjaraka ◽

Erina Sudaryati

Keyword(s):

Risk Taking ◽

Firm Value ◽

Structural Equation ◽

High Ability ◽

Manufacturing Companies ◽

Firm Risk ◽

Managerial Ability ◽

Risk Taking Behavior ◽

Corporate Investors ◽

Low Ability

This study aims to examine the role of managerial in firm decisions. This study recognizes that managerial plays an important role in corporate decision making. Decisions carried out by the company are not only influenced by the manager's explicit mandate to maximize firm value, but also by the manager's ability to manage the company. In previous research it was found that high-ability and low-ability managers have opposite effects on firm behavior and firm value. High-ability managers accept risk-taking whereas low-ability managers refrain from taking risks. Managerial Ability in this study was measured using DEA (Data Envelopment Analysis) while for firm risk-taking behavior using the return on assets (ROA), return on equity (ROE), and research and development costs to total assets (R&D). The model used in this study is a causality model or the relationship of influence between research variables. The proposed model is analyzed using the Structural Equation Model (SEM) causality technique. This research was conducted on manufacturing companies listed on IDX (Indonesian Stock Exchange) in 2013-2017. However, unlike previous studies, the results of this study indicate that highly capable managers play a role in minimizing corporate risk taking. This research contributes as a reference for Indonesian corporate investors and also regulators as a reflection of the effectiveness of regulations made in Indonesia.

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Monetary policy uncertainty and firm risk-taking

Pacific-Basin Finance Journal ◽

10.1016/j.pacfin.2021.101695 ◽

2021 ◽

pp. 101695

Author(s):

Weijie Luo ◽

Yong Wang ◽

Xiaoge Zhang

Keyword(s):

Monetary Policy ◽

Risk Taking ◽

Policy Uncertainty ◽

Firm Risk

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Which formula for corporate risk-taking around the world? Exploring happiness as the “black box”

Journal of Asian Business and Economic Studies ◽

10.1108/jabes-01-2021-0009 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Thao Phuong Tran ◽

Anh-Tuan Le

Keyword(s):

Risk Taking ◽

Negative Influence ◽

Current Debate ◽

Alternative Measure ◽

Firm Risk ◽

Content Type ◽

Financial Decisions ◽

The World ◽

Corporate Risk

PurposeThis paper examines how the degree of happiness affects corporate risk-taking and the moderating influence of family ownership of firms on this relationship.Design/methodology/approachThe authors use an international sample of 17,654 firm-year observations from 24 countries around the world from 2008 to 2016.FindingsUsing the happiness index from the World Happiness Report developed by the United Nations Sustainable Development Solutions Network, the authors show that a country's overall happiness is negatively correlated with risk-taking behavior by firms. The findings are robust to an alternative measure of risk-taking by firms. Further analyses document that the negative influence of happiness on firm risk-taking is more pronounced for family-owned firms.Practical implicationsThe paper is consistent with the notion that happier people are likely to be more risk-averse in making financial decisions, which, in turn, reduces corporate risk-taking.Originality/valueThis study contributes to the broad literature on the determinants of corporate risk-taking and the growing literature on the role of sentiment on investment decisions. The authors contribute to the current debate about family-owned firms by demonstrating that the presence of family trust strengthens the negative influence of happiness on corporate risk-taking, a topic that has been unexplored in previous studies.

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