Corporate Risk Culture. (27th December 2017)

• Record Type: Journal Article
• Authors: Pan, Yihui; Siegel, Stephan; Wang, Tracy Yue
• Is Part Of: Journal of financial and quantitative analysis. Volume 52:Number 6(2017)
• Page Start: 2327
• Page End: 2367
• Publication Date: 2017-12-27
• Subjects: Finance -- Periodicals; Investments -- Mathematics -- Periodicals; 332.05
• DOI: 10.1017/S0022109017000771
• Languages: English
• ISSNs: 0022-1090

Abstract

Abstract : We examine the formation and evolution of corporate risk culture, that is, the preferences toward risk and uncertainty shared by a firm's leaders, as well as its effect on corporate policies. We document persistent commonality in risk attitudes inside firms, which arises through the selection of leaders with similar preferences and is rooted in the founders' risk attitudes. Changes in corporate risk culture over time affect corporate investment policies, whereas cross-sectional differences in founders' risk attitudes, that is, firms' initial risk culture, contribute to differences across firms in persistent firm policies, such as research and development intensity.