scholarly journals Do Managerial Ability Impact Indonesian Firm Risk-Taking Behavior?

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.

Risk-taking behavior of drilling workers: A study based on the structural equation model

2021 ◽  
Vol 86 ◽  
pp. 103219
Author(s):  
Jingdong Shi ◽  
Yaning Sun ◽  
Hetao Su ◽  
Yiru Wang ◽  
Zijun Huang ◽  
...  
Keyword(s):  
Structural Equation Model ◽  
Risk Taking ◽  
Structural Equation ◽  
Equation Model ◽  
Risk Taking Behavior

scholarly journals The Influence of Intellectual Capital on Firm Value towards Manufacturing Performance in Indonesia

2015 ◽  
Author(s):  
Euphrasia Susy Suhendra
Keyword(s):  
Firm Performance ◽  
Intellectual Capital ◽  
Firm Value ◽  
Structural Equation ◽  
Stock Exchange ◽  
Value Added ◽  
Secondary Data ◽  
Market Valuation ◽  
Annual Reports ◽  
Manufacturing Companies

The aim of this study is to analyse the influence of intellectual capital on firm value through firm performance (profitability, productivity, market valuation and growth). Intellectual capital is measured by using a Value Added Intellectual Coefficient (VAIC™). Firm value is measured by Tobin's Q. The financial performance consists of Return on assets (ROA), Asset turn over (ATO), Market to Book Value (MB) and Earnings per Share (EPS). Data from this study was obtained from financial statements and annual reports of manufacturing companies that are taken from the Indonesia Stock Exchange. The sample of this study is manufacturing companies listed on the Indonesia Stock Exchange during the year of 2011-2013 for 37 companies. The types of data used are secondary data in the form of annual reports by the manufacturing companies. Empirical analysis is conducted by using Structural Equation Modelling (SEM). The results of this study indicate that Intellectual capital has a significant effect on profitability, market valuation and growth. Intellectual capital does not significantly affect productivity and firm value. Market valuation significantly affects the firm value. Profitability, productivity and growth do not significantly affect firm value. Furthermore, Intellectual capital which is intervened by the firm performance has a positive effect on firm value.

scholarly journals Antecedents of Firm’s Risk-play – A Structural Equation Modeling Approach in an Emerging Market Context

2021 ◽  
Vol 15 (2) ◽  
pp. 56-82
Author(s):  
Ranjan DasGupta ◽  
Rashmi Singh
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Structural Equation ◽  
Emerging Market ◽  
Capital Intensity ◽  
Empirical Literature ◽  
Equation Modeling ◽  
Firm Risk ◽  
Managerial Risk ◽  
Income Stream

Firm-risk and managerial risk-taking though distinct are used interchangeably in empirical literature. Here, we identify these two distinctly by examining different proxies for them. We use income stream uncertainty and accounting beta to proxy firm-risk, and market risk and capital intensity ratio represent managerial risk-taking. Once defined, our objective is to find the antecedents of both these by using the most advanced structural equation modelling (SEM) approach from created constructs of performance, psychological, corporate governance, shareholding patterns, fundamental valuation and firm’s characteristics drivers. We formulate seven hypotheses based on empirical literature representing these constructs. We use data of 269 Indian firms for 18 (1999-2017) years to run SEM and then analyse our results individually and combinedly. SEM is used here to test the unidimensionality of the seven constructs (consisting of 19 drivers) and to analyze these drivers (i.e. antecedents) influence on firm-risk and managerial risk-taking i.e. firm’s risk-play. Results prove that present firm-performance, corporate governance drivers, promoters’ shareholding and firm’s characteristics are driving firm’s risk-play. However, fundamental valuation drivers have no role to play in influencing income stream uncertainty, systematic operating risks and managerial risk-attitudes. Psychological drivers and foreign shareholdings act only as a catalyst of firm-risk.

scholarly journals Hiring the Right CEO: How Does the Type of CEO Industry Experience Affect Firm Performance, Firm Risk-Taking Behavior, and CEO Compensation?

2021 ◽  
Vol 22 (2) ◽  
pp. 828-845
Author(s):  
Candra Chahyadi ◽  
Trang Doan ◽  
Junnatun Naym
Keyword(s):  
Firm Performance ◽  
Risk Taking ◽  
Ceo Compensation ◽  
High Growth ◽  
Firm Risk ◽  
Business Application ◽  
Risk Taking Behavior ◽  
Lead Firm ◽  
The Impact ◽  
Industry Experience

This paper examines how the type of CEOs’ industry experience (whether a CEO has cross-industry or specific-industry experience) on firm performance, firm risk-taking behavior, and their own compensation. We find that CEOs with cross-industry experience tend to relatively lower the firm performance as well as invest less on R&D. On the other hand, CEOs with specific-industry experience lead firm to higher performance and invest more on R&D expenditures until it reaches a certain threshold, especially among high-growth firms. Total compensation paid to the CEO does not seem to be affected by the type of CEO industry experience. This paper contributes to the literature that examines the impact of CEO characteristics on firm outcomes and CEO compensation. One important business application of our paper is that to optimize firm performance, firms should hire CEOs with the length of specific-industry experience not beyond the threshold levels.

scholarly journals Antecedents of Firm’s Risk-play – A Structural Equation Modeling Approach in an Emerging Market Context

2021 ◽  
Vol 15 (3) ◽  
pp. 67-94
Author(s):  
Ranjan Dasgupta ◽  
Rashmi Singh
Keyword(s):  
Corporate Governance ◽  
Risk Taking ◽  
Structural Equation ◽  
Emerging Market ◽  
Capital Intensity ◽  
Empirical Literature ◽  
Equation Modeling ◽  
Firm Risk ◽  
Managerial Risk ◽  
Income Stream

Firm-risk and managerial risk-taking though distinct are used interchangeably in empirical literature. Here, we identify these two distinctly by examining different proxies for them. We use income stream uncertainty and accounting beta to proxy firm-risk, and market risk and capital intensity ratio represent managerial risk-taking. Once defined, our objective is to find the antecedents of both these by using the most advanced structural equation modelling (SEM) approach from created constructs of performance, psychological, corporate governance, shareholding patterns, fundamental valuation and firm’s characteristics drivers. We formulate seven hypotheses based on empirical literature representing these constructs. We use data of 269 Indian firms for 18 (1999-2017) years to run SEM and then analyse our results individually and combinedly. SEM is used here to test the unidimensionality of the seven constructs (consisting of 19 drivers) and to analyze these drivers (i.e. antecedents) influence on firm-risk and managerial risk-taking i.e. firm’s risk-play. Results prove that present firm-performance, corporate governance drivers, promoters’ shareholding and firm’s characteristics are driving firm’s risk-play. However, fundamental valuation drivers have no role to play in influencing income stream uncertainty, systematic operating risks and managerial risk-attitudes. Psychological drivers and foreign shareholdings act only as a catalyst of firm-risk.

scholarly journals Effect of Capital Structures on Firm Value with Sales Growth and Return on Sales as Control Variables in Consumer Goods Companies Listed on the Indonesia Stock Exchange

2021 ◽  
Vol 12 (3) ◽  
pp. 225-230
Author(s):  
Zaenal Abidin ◽  
Rizki Reinaldy Putra ◽  
Mahelan Prabantarikso
Keyword(s):  
Consumer Goods ◽  
Firm Value ◽  
Structural Equation ◽  
Stock Exchange ◽  
Sampling Technique ◽  
Equation Modeling ◽  
Sales Growth ◽  
Manufacturing Companies ◽  
Control Variables ◽  
Return On Sales

One of the attempts taken by the management to maximize the value of the company to compete with its rivals is decision-making related to capital structure strategy. The research sought to determine the effect of Short-Term Debt (STD) on Total Assets (TA), Long-Term Debt (LTD) to Total Assets (TA), and Total Debt (TD) to Total Assets (TA) on firm value by using return on sales and revenue growth as control variables. The research was correlation research to observe the relationship between one variable and various other variables. The sample was consumer goods companies, especially food and beverage sub-sector manufacturing companies listed on the Indonesia Stock Exchange from 2015 to 2018. With a purposive sampling technique, there were 15 companies out of a total of 27 companies that met the criteria. Data were obtained from the Indonesia Stock Exchange website in the form of financial reports and closing prices. Then, structural equation modeling was used to analyze the data. Based on the analysis, there are several results. First, STD to TA and LTD to TA have a negative and significant impact on firm value. Second, TB to TA has a negative but insignificant impact on firm value. Third, sales growth has a positive and negligible effect. Last, return on sales has a negative and substantial effect.

scholarly journals Corporate Social Responsibility as Economic Mechanism for Creating Firm Value

2019 ◽  
Vol 3 (1) ◽  
pp. 22 ◽  
Author(s):  
Sam Ronald ◽  
Suwandi Ng ◽  
Fransiskus Eduardus Daromes
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Firm Value ◽  
Financial Constraints ◽  
Stock Exchange ◽  
Manufacturing Companies ◽  
Firm Risk ◽  
Financial Variables ◽  
Mediating Role ◽  
Corporate Social

This research is aimed to investigate the influence of corporate social responsibility (CSR) on financial variables such as financial constraints, risks and earnings quality as a mediating aspects for creating firm value. Data were collected from manufacturing companies listed on the Indonesia Stock Exchange for 2013–2016. By using regression and path analysis method, the result shows that CSR has a significant influence on increasing firm value. Meanwhile, the indirect influences show that financial constraints and risk have a positive mediating role in the relationship between CSR and firm value, while the quality of earnings has no mediating role. The finding reveals a difference result with previous studies that CSR has an influence on reducing firm risk. Conflict of stakeholder interest exists as the result of excessive CSR activities and trading noise are used to explain this relationship. This study also indicates that cash flow has better role in increasing firm value compared to the accounting earnings of firm.

Executive compensation and firm risk: an examination across industries

2018 ◽  
Vol 17 (3) ◽  
pp. 359-382 ◽  
Author(s):  
Stephen Abrokwah ◽  
Justin Hanig ◽  
Marc Schaffer
Keyword(s):  
Financial Crisis ◽  
Executive Compensation ◽  
Risk Taking ◽  
Financial Services ◽  
Firm Risk ◽  
Content Type ◽  
Risk Taking Behavior ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to examine the impact of executive compensation on firm risk-taking behavior, measured by the volatility of stock price returns. Specifically, this analysis explores three hypotheses. First, the impact of short-term and long-term executive compensation packages on firm risk is analyzed to assess whether the packages incentivize risk-taking behavior. Second, the authors test how these compensation and risk relationships were impacted by the financial crisis. Third, they expand the analysis to see if the relationship varies across different industries. Design/methodology/approach The econometric approach used to examine the executive compensation and firm risk relationship takes the form of two different panel model specifications. The first model is a pooled model using the panel data of executive compensation, the firm-level control variables and volatility of stock market returns. The second model highlights the differences in the relationship between executive compensation and riskiness of firm behavior across industries. Findings The authors find a significant and robust relationship, showing that during the post-financial crisis period firms tended to use long-term compensation shares to reduce firm risk. They also find that the relationship between various compensation components and firm risk varies across industries. Specifically, the bonus share of compensation negatively impacted firm risk in the financial services industry, while it positively impacted risk in the transportation, communication, gas, electric and services sectors. Additionally, long-term compensation share exhibits an inverse relationship with firm risk in the financial services, manufacturing and trade industries. Originality/value The conclusions of this paper suggest that there is indeed a relationship between executive compensation and firm risk across industries. There was a notable change in the relationship however between firm risk and long-term compensation following the financial crisis, where firms used long-term compensation to reduce firm riskiness. In other words, the financial crisis changed the nature of this relationship across S&P 1500 firms. The last key finding is that there exist differences in risk and compensation relationships across industries, and these differences across industries are highlighted across both bonus share and long-term incentive share variables. This is the first study to explore this relationship across industries.

Firms performance, risk taking and managerial ability

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Alex Johanes Simamora
Keyword(s):  
Risk Taking ◽  
Stock Exchange ◽  
Risk Mitigation ◽  
Hypothesis Test ◽  
Managerial Ability ◽  
Manufacturing Firm ◽  
Content Type ◽  
Effect Regression ◽  
Risk Taking Behavior

PurposeThis research aims to examine the moderating role of managerial ability on the relationship between risk-taking behavior and firms' performance.Design/methodology/approachThis research uses 383 manufacturing firm-years listed on the Indonesian Stock Exchange as the research sample. The hypothesis test uses fixed-effect regression analysis.FindingsThe result shows that risk-taking behavior has a positive effect on firms' performance for higher managerial ability. Managerial ability provides higher knowledge, skill and information to get benefits and mitigate costs of risk-taking behavior to improve firms' performance. The role of managerial ability to make risk-taking behavior increase firms' performance occurs more for high-ability managers, dual CEO, shareholder-CEO and family CEO.Originality/valueThis research contributes to answering the conflicting arguments and filling the previous findings gap between risk-taking behavior and firm performance by considering managerial ability as a factor to create effective risk mitigation.

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