Strategic Risk-taking Research Articles

Unveiling Gender Dynamics in Strategic Risk-Taking and Risk-Aversion Among Indonesian Executives

In this research, we aims to examine how gender disparities among corporate leaders (executives) and their level of risk aversion can impact the organization's strategic risk-taking. A questionnaire survey method was employed to collect data from executives in Indonesia holding minimum positions of senior manager (BOD-1), director or commissioner (C-Level). Standard behavioral economics expected utility approach is employed to quantify the degree of risk aversion, while respondents will also make investment choices to assess their inclination towards strategic risk-taking. The research employed the t-test and linear logistic regression analysis to examine the hypothesis. The research findings indicate that female executives exhibit a higher degree of risk aversion compared to their male counterparts. In line with most st udies, risk averse executives prefer to engage in more cautious strategic risk-taking. Nevertheless, there are no discernible disparities between female executives and male execautives when it comes to engaging in strategic risk-taking.

Understanding and managing the link between firms’ strategic risk-taking and salespeople’s defensive behavior in price negotiations

This study investigates how firms’ strategic risk-taking affects salespeople’s defensive behavior in price negotiations with clients, a major performance driver for firms. Despite the importance of firms’ strategy for salespeople’s job activities, research has thus far neglected it as an antecedent of salespeople’s negotiation behavior. Drawing on the expectancy theory, we theorize and test (1) how a firm’s risk-taking strategy affects a salesperson’s defensive behavior in price negotiations and (2) which levers sales managers must handle to control this relationship to the firm’s benefit. To this end, we conduct a multi-method investigation comprising a scenario experiment with 134 business-to-business (B2B) salespeople and an online survey with 377 B2B salespeople. The results reveal that in negotiations with clients, salespeople tend to show lower effort in defending their firm’s position when they perceive the firm’s strategy as risk-oriented. Importantly, sales managers can counteract this negative effect by bolstering salespeople’s instrumentality and expectancy of defending the firm’s position during price negotiations: When salespeople receive outcome-based compensation, particularly combined with pricing authority, the negative impact of the firm’s risk-taking strategy on salespeople’s defensive behavior is reduced.

Moderating effect of gross domestic production on the association between share ownership of CEO and strategic risk-taking of airlines

Purpose: The purpose of this research is to examine the moderating effect of gross domestic product on the relation-ship between share ownership and strategic risk-taking of airlines. Theoretical foundation of this work is upper echelon theory and contingency theory. Design/methodology/approach: The sample of this work is publicly traded airlines in the US stock market: NASDAQ, AMEX, and NYSE. For data collection, this work employed Annual 10-K, Bureau of economic analysis, Compustat, and Execucomp using SIC code 4512. 15 airlines were used and the study period is 1999-2019. For testing the research hypotheses, this study implemented multiple linear regression analysis. Findings: The results indicated that gross domestic product positively moderates the relationship between share ownership of CEO and strategic risk-taking of airlines. Research limitations/implications: The practical implication of this work is for the information provision of share-holders and potential investors for airline stocks. Originality/value: This research is worthy by elucidating the moderating effect of gross domestic product regarding top managers' decision making domain.

Cross-shareholding, Managerial capabilities, and Strategic risk-taking in enterprises: A game or a win-win?

In this study from 2007 to 2022, we explore the impact of cross-shareholding investors on the strategic risk-taking of A-share listed companies. The findings highlight that these stakeholders enhance strategic risk-taking through resource effects, advantageous information effects, with resource effects playing the most significant role. Managerial abilities further amplify this impact, showing substantial moderating effects. The positive influence is more pronounced for enterprises in low competitive positions with high-quality internal control. Stable cross-shareholding investors have a more pronounced positive impact compared to speculative ones, while non-peer cross-shareholding investors show no significant impact.

Transformational Leadership: A Comparative Exploration of the Leadership Prowess of Jeff Bezos and Steve Jobs

This exploratory study delves into the intricacies of transformational leadership within the technology sector, drawing insights from the leadership styles of Steve Jobs of Apple and Jeff Bezos of Amazon. The research aimed to understand how transformational leadership traits influence organizational outcomes like innovation, employee motivation, engagement, and overall performance. To achieve this, the study employed a mixed-method approach, incorporating both quantitative and qualitative data collection techniques. Primary data was gathered using a structured questionnaire, which was administered to a purposively sampled group of 567 respondents, all holding leadership or managerial roles in various industries. The questionnaire design integrated both closed-ended and open-ended questions to facilitate a comprehensive analysis. The data analysis involved rigorous regression analysis to quantitatively assess the relationships between specific transformational leadership traits and organizational outcomes. Key findings revealed a strong positive correlation between the level of inspirational motivation demonstrated by leaders and the degree of organizational innovation. Additionally, significant relationships were observed between the extent of individualized consideration by leaders and employee motivation and engagement, as well as between strategic vision and risk-taking by leaders and key organizational performance metrics. Drawing from these insights, the study recommends cultivating a leadership style that emphasizes inspirational motivation, individualized consideration, and strategic risk-taking. This approach is crucial for fostering innovation, enhancing employee motivation and engagement, and improving overall organizational performance in the rapidly evolving technology sector.

Green bond financing, environmental regulation, and long-term value orientation: evidence from Chinese-listed companies.

In recent years, green bonds have become an important part of the green financial system. In this paper, we investigate theoretically and empirically how green bond financing impacts corporate long-term value orientation. To study this relationship, we manually collect green bond financing data and use Python to construct a measure reflecting corporate long-term value. Using a sample of Chinese A-share bond issuing companies from 2016 to 2021, we find that (1) green bond financing can significantly promote companies to pursue long-term value, in which financing costs, management's strategic risk-taking, and external supervision are the underlying mechanisms. (2) There is a synergistic effect between green bond financing and environmental regulation, which can jointly improve the intensity of corporate long-term value orientation. (3) The relationship between green bond financing and corporate long-term value is more significant in enterprises with heavily polluting, lower risk-taking levels, less strategic change, and lower financial mismatch risk. Our findings reveal the "corrective" effect of green bond financing on management's strategic decision-making, which provides new empirical evidence for comprehensively and accurately evaluating the role of green bonds and promoting the development of the green bond market.

Gender-Based Experiential Risk Aversion Driving Women Appointed CEO Strategic Risk-Taking

Gender-Based Experiential Risk Aversion Driving Women Appointed CEO Strategic Risk-Taking

Do CEO's attributes increase risk-taking? Empirical evidence from France

PurposeThe current paper studies how CEO attributes could influence corporate risk-taking. The authors examine the effects of CEO demographic attributes and CEO position's attributes on financial and strategic risk-taking.Design/methodology/approachThis study is drawn on non-financial firms listed on the SBF120 index, between 2001 and 2013.FindingsFirst, long-tenured CEOs are prone to decrease the total risk and the leverage ratio. Second, despite the many CEOs have political connections; they are not prone to engage in risky decisions not serving the business' interests. Third, old CEOs are likely to rely on debt to fund internal growth. Moreover, business and science-educated CEOs behave differently in terms of risk-taking. Finally, the authors show that CEOs' attributes have less influential effects in family firms than in non-family firms. Also, they seem to have more significant associations with risk-taking during and after the financial subprime crisis.Originality/valueThis paper examines how cognitive traits could shape investments decisions, in terms of risk preferences.

The non-uniform relationship between CEO stock options and strategic risk-taking: the moderating role of firm performance

PurposeThe purpose of this study is to examine the relationship between stock options compensation and firm strategic risk-taking, employing a quantile regression (QR) model. This study aims to analyze whether the impact of stock options on firm strategic risk-taking changes across various quantiles and investigates the moderating role of firm performance.Design/methodology/approachThis study is based on a sample of 90 French firms for the period extending from 2008 to 2019. To deal with the non-uniform association, the authors use a panel quantile method.FindingsThe results reveal that the impact of chief executive officer (CEO) stock options on firm strategic risk-taking varies across risk-taking quantiles. More specifically, the study’s results show a positive association at low quantile levels of strategic risk-taking, measured by research and development (R&D) and a negative linkage at high levels. The authors also find that firm performance moderates the impact of CEO stock options on strategic risk-taking.Research limitations/implicationsThe non-uniform relationship between CEO stock options and firm strategic risk-taking shows that the weight of CEO stock options in the total compensation can be a major determinant of the firm's strategic risk-taking attitude.Originality/valueThis study extends existing research on executive compensation and strategic risk-taking. Thus, this study has the potential to help stakeholders, board of directors and regulators, who are attempting to understand how the compensation contract – in particular, stock option pay – is related to the risk behavior of the agents and guide them to structure the executive compensation in an optimal way.

Strategic risk-taking in dynamic contests

We investigate a process of decision-making in a multi-period winner-take-all contest, in which competing players simultaneously choose among actions with different levels of risk every period. Strategic risk-taking is analyzed in isolation from effort choices, and, according to expected utility theory, risk preferences are irrelevant. We derive a closed-form solution of the dynamic game for any number of periods. In the equilibrium, a leading player chooses the lowest level of risk, a trailing player chooses the highest level of risk, and all elements of the action space with intermediate levels of risk are irrelevant. We design a laboratory experiment to test various comparative statics of the model and explore behavioral deviations. Our findings are consistent with theoretical predictions – subjects tend to choose riskier lotteries when they are behind and safer lotteries when they are ahead, while the magnitude of the advantage does not seem to affect the risk-taking levels. We also observe some behavioral deviations such as a decline in risk-taking in the absence of the safe option, which only occurs while being behind. We find the quantal response equilibrium of our dynamic game and explain some of behavioral deviations; incorporating learning, subject types, and the probability weighting function into the behavioral model allows us to explain the rest of behavioral findings obtained from the data and compare the relative importance of these components.

May Bad Luck Be Without You: The Effect of CEO Luck on Strategic Risk-Taking

May Bad Luck Be Without You: The Effect of CEO Luck on Strategic Risk-Taking

Are Female CEOs Really More Risk Averse? Examining Economic Downturn and Other-Orientation

Scholars and practitioners have offered anecdotal evidence that firms led by female chief executive officers (CEOs) fare better during global recession, perhaps because they take fewer risks. In contrast to commonly held stereotypes that women are more risk averse than men, neither systemic theorizing nor empirical findings support that this popular assumption holds among top organizational leadership. Rather than seeking absolute gender differences in risk aversion, we take a more nuanced approach, considering executive job demands and decision orientation theories to examine underlying psychological mechanisms and economic boundary conditions to gender differences in strategic risk-taking. We test our hypotheses using multiple methods and samples, including an archival study of Fortune 1,000 firms and a survey of CEOs. Our results challenge absolute assumptions of gender risk preferences; rather, we find that female CEOs are less likely to choose risky strategies in a high job demands environment (e.g., economic downturn) due to underlying gender differences in other-orientation.

CONCEPTUALIZING STRATEGIC RISK-TAKING BY SMALL STATES UNDER GAME THEORY (A CONSTRUCTIVIST ANALYSIS)

This paper undertakes a constructivist analysis of Game Theory approach and presents the co conceptualization of different players in a system i.e. small states, hegemonic and counter-hegemonic states on the basis of role conceptualization , perceptions, ideals and beliefs regarding “self” and “others”. The paper then presents the dilemma faced by a small state in a system while dealing with the hegemon and counter-hegemon and introduces the concept of strategic risk-taking to encapsulate that any action (or inaction) by the small state in a system, even if it be seemingly docile in character aimed at ensuring state sovereignty, is contingent upon the perceptions, beliefs and ideals of the hegemon and counter-hegemon. The paper further argues that any action or inaction by the small state even for securing its sovereignty is deemed a risk-taking action or inaction by the greater power, mostly hegemon. The paper while presenting the case studies from South Asia explores as to how the strategic risk-taking by small states, as perceived by the hegemon or counter-hegemon leads to a lose-lose situation through creation of security dilemmatic situation as a final outcome of the gaming approaches.

Temporal Distinction of Multiple Goals and Effects on Strategic Risk-Taking

Organizational goals play a central role in driving firm decision making. The behavioral theory of the firm conceptualizes goals as situational aspirations that guide organizational adaptation through performance feedback. However, this aspiration-directed logic implicitly assumes the short-term orientation of decision makers, while the effect of long-term strategic goals on firm decision making is less explored. Our study focuses on long-term strategic goals, which, we argue, influence firm decision making through decision makers’ commitment. Borrowing insights from strategic communication research, we conceptualize strategy specificity to capture decision makers’ commitment to strategic goals and theorize its implications for firm strategic risk-taking. Additionally, we examine the interactive effects of strategy specificity and performance feedback on strategic risk-taking, with contingencies of managerial discretion and board shareholding. Using panel data on 1,074 Chinese listed firms in manufacturing industries, we find that firms with higher strategy specificity engage in more strategic risk-taking. However, this behavioral tendency is weakened when firms receive strong negative or positive performance feedback. Moreover, we find that the moderating effect of performance feedback on strategy specificity is enhanced by managerial discretion but mitigated by board shareholding.

Inspiration or Aspiration? Mission Specification and Firm Strategic Risk-Taking

Organizational goals play a vital role in driving strategic decision-making. However, extant research mostly examines situational and backward-looking aspirational goals, while long-term- oriented ...

What motivates directors to pursue long-term strategic risks? Economic incentives vs. fiduciary duty

Prior research in agency theory views outside directors as being mostly extrinsically motivated by the potential for financial rewards, and as such stresses the value of using director stock options and equity to incentivize outside directors to pursue strategic risks. We draw on and extend agency-theory by arguing that outside directors are primarily intrinsically motivated, and therefore excessive emphasis on pecuniary rewards and punishments can ironically subvert a director's motives away from strategic risk-taking. In particular, we claim that more important than extrinsic rewards and government regulations is creating a secure environment for directors so that they may exercise their fiduciary duties without fear of litigation. We test our theory on a sample of 196 S&P 500 firms from 2005 to 2015 and find that the pressures imposed on the board through external regulations and controls can often backfire and result in outside directors signing off on less risky expenditure. A strong implication of these findings is no real substitute exists to creating a safe environment for directors, where they have the freedom to pursue the long-term interests of the principals, even if this goes against the short-termism of capital markets.

The relationships between CEO characteristics and strategic risk-taking in family firms

We examine the influences of chief executive officer (CEO) personal characteristics on family firms’ strategic risk-taking. Building on upper echelons theory, we investigate the influences of CEO family relationships, the CEO professional education, other career experiences, tenure, and career horizon have on the risk level a company takes. By analyzing a sample of 107 Italian family firms listed on the Milan Stock Exchange, we find that company’s risk-taking significantly and negatively relates to CEO family relationship and professional education, but positively to CEO career horizon. This provides support to the argument that such CEO personal characteristics are key factors in explaining differences in risk-taking among family firms. Further, our analysis of control variables shows that family firms’ risk-taking relates positively to board size and negatively to company size. These results suggest that company and board characteristics also significantly influence the risk levels taken by a company.

Building a Culture of Strategic Risk-taking in a Science Library: Turning Failure into Learning Opportunities

Building a Culture of Strategic Risk-taking in a Science Library: Turning Failure into Learning Opportunities

Building a Culture of Strategic Risk-taking in a Science Library: Creating Psychological Safety and Embracing Failure

Academic librarians and library managers are always exploring new ways to empower their team to provide the best services to the entire research community. This requires organizations to take innovative approaches to new ideas as well as existing services and initiatives. With innovation, a certain amount of strategic risk has to be involved, but how much is too much? More importantly, how do you create a culture where people feel free to take risks and, sometimes, fail? These columns explore those questions as a case study of the Dirac Science Library at Florida State University.

Heterogeneity in Target Date Funds: Strategic Risk-taking or Risk Matching?

The use of target date funds (TDFs) as default options in 401(k) plans increased sharply following the Pension Protection Act of 2006. We document large differences in the realized returns and ex ante risk profiles of TDFs with similar target retirement dates. Analyzing fund-level data, we find evidence that this heterogeneity reflects strategic risk-taking by families with low market share, especially those entering the TDF market after 2006. Analyzing plan-level data, we find little evidence that 401(k) plan sponsors consider, to any economically meaningful degree, the risk profiles of their firms when choosing among TDFs. Received June 13, 2013; editorial decision March 20, 2018 by Editor Laura Starks. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.