Top management conservatism and corporate risk strategies: Evidence from managers' personal political orientation and corporate tax avoidance

We investigate whether managers' personal political orientation helps explain tax avoidance at the firms they manage. Results reveal the intriguing finding that, on average, firms with top executives who lean toward the Republican Party actually engage in less tax avoidance than firms whose executives lean toward the Democratic Party. We also examine changes in tax avoidance around CEO turnovers and find corroborating evidence. Additionally, we find that political orientation is helpful in explaining top management team composition and CEO succession. Our paper extends theory and research by (1) illustrating how tax avoidance can serve as another measure of corporate risk taking and (2) using political orientation as a proxy for managerial conservatism, which is an ex ante measure of a manager's propensity toward risk. Copyright © 2014 John Wiley & Sons, Ltd.     

Influences of top management team incentives on firm risk taking

In our work, the influences on subsequent firm risk taking of fixed incentives relative to variable incentives as well as the separate effects on subsequent corporate risk taking of variable incentives are examined. Focusing on the top management team members, we find a higher proportion of incentives that are devoted to fixed incentives relative to variable incentives tend to be inversely associated with subsequent firm risk taking. Managerial stock options are directly and uniformly associated with subsequent corporate risk taking. Executive shareholdings, however, display a curvilinear relationship with subsequent enterprise risk taking. Copyright © 2007 John Wiley & Sons, Ltd.     

A dual agency view of board compensation: the joint effects of outside director and CEO stock options on firm risk

This paper contributes to multiple agency theory by examining how the compensation schemes awarded to outside directors and the CEO jointly affect firm‐level risk taking. Using data of the S&P 1500 firms from 1997 to 2006, we find support for earlier arguments that providing the CEO, the outside directors, or both with stock options increases risk taking. More importantly, we find that compensating outside directors with stock options has significantly stronger effects than CEO stock options. Finally, contrary to what one would expect, we find that these effects are mutually substituting; that is, if both the outside directors and the CEO are provided with stock option compensation, outside directors' incentives weaken the effect of the CEO's incentives on firms' risk taking. Copyright © 2010 John Wiley & Sons, Ltd.     

Securitization,Risk‐Taking and the Option to Change Strategy

This article models the riskiness of structured securitization deals. The deals are put together by “banks,” which can exercise strategic options over the risk put into the deals. The banks face a trade‐off between the benefits of risk‐taking now and future franchise benefits if the deal pays off. The key insight is a convex relationship between the value of the bank's equity position and the risk in the deal. Although there is a continuum of possible risk, banks choose either the highest or lowest levels of risk open to them. Changes in strategy are discontinuous and unpredictable; a history of low risk‐taking may be a prelude to increased risk‐taking later. Competition, to the extent of reducing franchise value, can lead to more risk‐taking, as can more information in the market. The model provides insights into the risk‐taking that led up to the Great Recession and to institutions that are “Too Big to Fail.”     

Decoupling risk taking from income stream uncertainty: a holistic model of risk

This paper builds and tests a holistic model of risk in organizations. Using structural equations modeling, we disaggregated risk into two distinct components, managerial risk taking and income stream uncertainty, or organizational risk. This allowed us to identify an array of organizational and environmental antecedents that have either been examined in isolation or neglected in previous studies about risk. Our results suggest that both organizational and environmental factors promote risk taking. Further, we found strong support for behavioral theory of the firm and agency theory on risk but not upper echelons theory. Our data also suggest that environmental characteristics have a negligible direct effect on organizational risk. Instead, the environment’s impact on risk occurs primarily through managerial choices. Copyright © 1999 John Wiley & Sons, Ltd.     

Is R&D risky?

Research summary : Many studies use research and development (R&D) intensity or R&D spending as a proxy for risk taking, but we have little evidence that either associates positively with firm risk. We analyze the relations between R&D intensity (R&D spending to sales) and R&D spending on the one hand and 11 different indicators of firm risk on the other, using data from 1,907 to 3,908 firms in various industries over 13 years. The analysis finds a general lack of consistent positive association between R&D and firm risk, making the use of R&D as an indicator of risk taking questionable. Furthermore, R&D intensity and spending do not correlate positively, suggesting they measure different constructs. We discuss potential reasons for these nonsignificant results. Our study demonstrates that researchers should avoid casual use of R&D as a proxy for risk taking without explicitly providing a clear definition and measurement model for risk. Managerial summary : Risk is a key construct in strategic management research. Many studies in this area measure risk taking by research and development (R&D) intensity (the ratio of R&D spending to sales) or R&D spending. However, since R&D intensity and spending have also been used to measure various other things such as information processing demands, this raises the question of whether R&D intensity and spending are valid indicators of firm risk. We examine this issue by considering the associations of R&D intensity and R&D spending with conventional measures of firm risk. We find a general lack of consistent positive association between R&D and firm risk, making the use of R&D as an indicator of risk taking questionable. Furthermore, R&D intensity and spending do not correlate positively, suggesting they measure different things. Copyright © 2016 John Wiley & Sons, Ltd.     

Testing a model of reasoned risk‐taking: governance,the experience of principals and agents,and global strategy in high‐technology IPO firms

Research on the governance of risky ventures, like the initial public offerings (IPOs) of high‐technology firms, has focused primarily on the relationship between governance mechanisms and firm performance. While such an emphasis is clearly important, it does little to shed light on potential relationships between governance and the strategies pursued by risky firms, nor does it take into account the complementary role of key stakeholders in affecting those strategies. To partially remedy this deficit we integrate agency and behavioral perspectives to develop a theory of ‘reasoned risk‐taking,’ whereby the nature of risks undertaken is a consequence of the interaction of governance mechanisms and stakeholder characteristics. We demonstrate our theory by predicting when corporate governance should be associated with strategic risk‐seeking beyond a firm's technical core—as seen in the degree to which it has expanded internationally. Surprisingly, even though venture capitalists (VC) are risk specialists, we find that technology‐based IPO firms are less likely (i.e., a negative relationship) to have extensive global sales when they are backed by a VC. In support of our reasoned risk‐taking theoretical framework, we find that VCs are indeed risk‐seeking when VC backing is complemented by the international experience of their board appointees, top management team (TMT) members, or both. IPO firms with significant insider ownership are similarly global risk‐seekers, and those effects are strongest with an internationally seasoned board and TMT at the helm. Copyright © 2003 John Wiley & Sons, Ltd.     

The impact of culture on the relationship between governance and opportunism in outsourcing relationships

To address concerns of opportunism, outsourcing firms are encouraged to deploy contractual and relational governance. The individual and collective effects of these mechanisms have been previously examined but not in specific contexts. This study examines the effects of contractual and relational governance on provider opportunism, incorporating the moderating influence of a “shift parameter”—national culture. Our results reveal that contractual governance is more effective in individualistic and low uncertainty avoidance cultures. Relational governance is more effective in collectivist and high uncertainty avoidance societies. The individualism–collectivism dimension also moderates the joint effect of these mechanisms. While the mechanisms are generally complementary in mitigating opportunism, a singular focus on either contractual or relational can be just as effective under situations of high individualism and collectivism, respectively. Copyright © 2014 John Wiley & Sons, Ltd.     

基于电网风险特点的新兴财产保险公司风险管理战略

在风险管理框架下,涉及电网企业创造核心价值过程中的风险主要有危害性风险和金融战略风险。电网风险的链式传导性和内生性要求与完善的保险化风险管理措施相匹配。基于电网风险特点,以某公司为例,分析财险公司建立的风险管理系统框架,提出实施风险管理的具体措施。     

The influence of relative values of outside director stock options on firm strategic risk from a multiagent perspective

Prior work has examined the effects of absolute levels of outside director stock option grants on risk behavior without recognizing that relative stock option values could differentially affect risk taking. Drawing from the house money effect perspective, we extend this literature by examining how positive deviation from prior outside director option grants values influences firm strategic risk. Additionally we draw from the behavioral agency model and the power literature to develop a multiagent contingency framework suggesting the effect of positive director pay deviation depends on the incentives and power of CEOs reflected in CEO stock ownership and CEO duality, respectively. Our empirical results indicate positive pay deviation has a positive effect on firm risk taking while high ownership and duality independently and jointly weaken this base relationship. Copyright © 2013 John Wiley & Sons, Ltd.     

Disentangling compensation and employment risks using the behavioral agency model

Employing survey and archival data from a sample of IPO firms, and extending the ideas of the Behavioral Agency Model, this study examines the influence of various forms of risk bearing created within the compensation contract on perceived risk taking. The results show that employment risk and variability in compensation each corresponds to greater risk taking, while downside risk and the intrinsic value of stock options correspond to lower risk taking. Among the implications from these results are the importance CEOs attach to relatively stable forms of pay, and to drawing distinctions between the potential for loss of pay and uncertainty about the amount of future pay. Copyright © 2007 John Wiley & Sons, Ltd.     

CEO tenure and organizational performance: an intervening model

While CEO job tenure is seen as influencing firm performance, the intervening mechanisms that govern this influence have remained largely unexplored. Given that individuals in the firm most closely influenced by the CEO are members of the top management team (TMT), we focus on the CEO‐TMT interface as one important intervening mechanism. Specifically, our tested model suggests that CEO tenure indirectly influences performance through its direct influences on TMT risk‐taking propensity and the firm's pursuit of entrepreneurial initiatives. Results from structural equation modeling are consistent with this model and support its associated hypotheses. In the discussion, we trace the implications of our study for research and practice. Copyright © 2007 John Wiley & Sons, Ltd.     

关于石油企业风险预警与防风险措施初探

石油勘探开发是高风险、高投入行业，石油企业时刻面临诸如勘探风险、油价波动风险、市场风险、国际政治经济风险等多重风险因素的影响。深入探讨和研究石油企业的经营风险和预警管理很有必要。石油企业的防范和规避风险预警措施，应包括：建立一套规范、全面的预警管理程序和预警系统，通过多渠道建立国家战略石油储备，建立健全石油企业内外部预警监督机制等。通过建立企业预警指标体系和预警机制，采取有效的预警措施，促使石油企业健康、持续、稳定发展。     

The role of reference point in CEO restricted stock and its impact on R&D intensity in high‐technology firms

Prior work based on agency theory and behavioral agency model has focused on how absolute pay values affect firm outcomes. Departing from this traditional approach, we draw from behavioral decision theory to explain how relative pay levels influence firm risk taking. We investigate how CEO restricted stock value relative to reference point influences R&D intensity in high‐technology firms. We propose that negative deviation increases are related to R&D increases and positive deviation increases lead to R&D decreases, while negative deviation has greater effect than positive deviation. We establish theoretical boundary conditions by considering CEO duality and board vigilance as moderators. Drawing from agency theory, we predict the main effects will be enhanced under duality and weakened under high board vigilance. Our hypotheses are largely supported. Copyright © 2014 John Wiley & Sons, Ltd.     

What governs directors’ monitoring behavior in China? The influence of director social identification,learning goal orientation,and avoidance orientation

Drawing together literature on corporate governance, organizational behavior, and educational psychology, and using survey data from a sample of 300 Chinese company directors, this study examines the mediating role of director learning goal orientation in linking two widely-acknowledged director social identifications (identification with the organization and identification with executive-agents) and a key director task behavior, namely the monitoring of executive-agents. We also investigate the moderating role of director avoidance orientation in influencing this mediation since a predisposition to avoid loss of “face” is widely posited as having particular relevance in the Chinese context. Results show, first, that directors with stronger organizational identification monitor executive-agents more diligently than those with stronger executive-agent identification. Second, we find that while learning goal orientation mediates the positive effects of both organizational identification and executive-agent identification on monitoring, the mediated indirect effect of organizational identification on monitoring is stronger than the mediated indirect effect of executive-agent identification on monitoring. Third, results show that the indirect effects are stronger when director avoidance orientation is low. These findings underscore the importance of director social identification and learning goal orientation in inducing director monitoring in the Chinese context, as well as the worth of selecting directors who exhibit a low disposition to avoidance.     

Measuring and Utilizing Corporate Risk Tolerance to Improve Investment Decision Making

Strategic investment decisions are generally characterized by financial risk as well as an irrevocable commitment of significant amounts of capital. The firm's willingness to undertake financial risks plays an important role in the investment decision making process. A comprehensive economic decision analysis to evaluate strategic investment decisions requires a measure of the firm's tolerance for financial risk. This article describes a decision analysis–based technique for assessing managerial risk tolerance as well as managers' ability to be consistent in terms of their financial risk taking. These assessments are then utilized to assist the firm in establishing a corporate risk policy that can guide strategic decisions under uncertainty. The study firm is a business unit within a U.S.-based major oil company with an annual capital budget of approximately $400 million. Our findings suggest that managers are generally risk averse but struggle in terms of being consistent in their financial risk-taking decisions. This work enabled the firm to implement a financial risk tolerance that could be utilized in the economic decision analysis of investment decisions.     

Genetic and psychological underpinnings of motivation and satisfaction of industrial salespeople

We investigate the effects of genetic polymorphisms of salespeople on their motivation and job satisfaction. We hypothesize that psychological attachment styles (anxious, avoidance, and secure) and role conflict interact with variants of three genes (dopamine DRD4, COMT and OXTR) to influence motivation and satisfaction. Our approach follows the spirit of the emerging subfield of organizational neuroscience and biological foundations of social behavior recently introduced into the literature and is one of the first studies to uncover complex dependence of behavior on genes and to employ a large enough sample to reduce false positive inferences. Variants of the DRD4 and COMT genes are found to interact with avoidance and secure attachment style, respectively, to influence motivation, under conditions of felt role conflict. Variants of OXTR have main effects on job satisfaction, as do anxious attachment styles and felt role conflict. Hypotheses are tested on a sample of 334 salespersons selling goods and services to business customers. The role of genetic endowment represents untapped origins for research into the behavior of salespeople and has a number of managerial implications that we discuss.     

Strategy and industry effects on profitability: evidence from Greece

The present study examines the impact of firm and industry‐specific factors on profitability, using census data on Greek manufacturing. At the firm level, particular attention is given to strategy effects. Based on a modification of Porter's typology, these effects are captured through different forms of both ‘pure’ and ‘hybrid’ strategies. Industry effects are represented using industry concentration, entry barriers, and growth. Hypotheses are developed taking into account both previous research and the particular idiosyncrasies of the national context. The results obtained provide important insights on specific determinants of firm profitability. With respect to strategy, results confirm the hypothesis that hybrid strategies are clearly preferable compared to pure ones. In addition, it was found that the more generic strategy dimensions are included in the strategy mix, the more profitable the strategy is, provided that one of the key ingredients is low cost. Industry‐level effects, although weaker, show strong impact of industry entry barriers. Moreover, the findings suggest that while both sets of factors significantly contribute to firm profitability, firm‐specific factors explain more than twice as much profit variability as industry factors. Copyright © 2003 John Wiley & Sons, Ltd.     

Relationship stability, trust and relational risk in marketing channels: Evidence from China

This paper provides an integrated framework for examining effects of relationship stability and trust on relational risk and for exploring the moderating effects of guanxi on the relationships between trust and relational risk in marketing channels. The framework is tested with 225 dyads of questionnaires about buyer-supplier relationships in the Chinese household appliances sector. The results indicate that relationship length and dyadic solidarity can reduce the relational risk perceived by buyers through goodwill trust in their suppliers, but can increase the perceived relational risk through trust in their competence. Guanxi helps to weaken the positive relationship between a buyer's trust in suppliers' competence and its perceived relational risk, and dyadic solidarity can directly lower relational risk. This paper makes clear that buyers locked in a stable relationship will face relational risk, and it further identifies the specific variables which impact on the relational risk and the paths from which relational risk comes.     

The structure of ownership and corporate acquisition strategies

In this study, we examine in an agency‐theoretic context the influence of executive equity stakes upon corporate strategy and firm value. We argue that beneficial, risk‐increasing corporate strategies may initially be emphasized but non‐value‐maximizing, risk‐reducing strategies may subsequently be emphasized as managers expand their stock ownership. We alternatively contend that stock options may have a consistently positive impact on firm risk taking and acquisition returns. The empirical findings are supportive of our expectations. Copyright © 2002 John Wiley & Sons, Ltd.