Testing a causal model of corporate risk taking and performance

Article Abstract:

The determinants of organizational risk taking and its impact on economic performance are critical issues in strategic management. Using a model that included risk, performance, performance expectations and aspirations, slack, and industry performance, this research addressed how past performance and other factors influence risk taking and how risk taking and other factors influence future performance. Not only did poor performance appear to increase risk taking - risk taking appeared to result in further poor performance, even when past performance, industry performance, and organizational slack were controlled. Overall, the results favor a model in which low performance and lack of slack drive risk taking, but the risks taken have poor returns. (Reprinted by permission of the publisher.)

Economic aspects, Finance, Corporate finance, Organizational behavior, Risk-taking (Psychology), Risk taking

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Strategic risk and corporate performance: an analysis of alternative risk measures

Article Abstract:

This study demonstrates that the various measures of corporate risk strategic management research has used reflect different risk factors. Factor analysis of nine measures of risk yielded three factors: income stream risk, stock returns risk, and strategic risk. The factors were stable over time. Income stream and strategic risk in a given five-year period reduced firm performance in the next five years; however, the strength of the effect varied across industries and between high- and low-performance firms. Contrary to previous cross-sectional work, performance reduced subsequent income stream uncertainty for high performers and increased income stream risk for low performers. (Reprinted by permission of the publisher.)

Research, Methods, Analysis, Management, Risk (Economics), Management research, Strategic planning (Business)

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Corporate risk-return relations: returns variability versus downside risk

Article Abstract:

This study tested a model of firm risk-return relations in which risk was conceptualized in terms of downside outcomes. Drawing on the behavioral theory of the firm, we developed a set of hypotheses involving downside risk, return, and organizational slack. The hypothesized risk and return relations were tested using both downside risk and the conventional standard deviation of returns. The results indicate downside risk results in improved subsequent performance. Performance shows a negative relation with subsequent downside risk. (Reprinted by permission of the publisher.)

Risk management, Organizational effectiveness, Return on investment, Rate of return

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