Influence of perceived risk on entrepreneurial desirability and feasibility: multidimensional approach for nascent entrepreneurs

This study examines the influence of perceived risk on entrepreneurial desirability and feasibility as determining factors in the intention to start a self-owned business. Specifically, a multidimensional approach is taken to examine the different types of risks associated with entrepreneurship: economic, social, time, health and personal risks. The results obtained from a sample of 376 new entrepreneurs in Mexico confirm the fact that the perceived desirability and feasibility have a significant and positive effect on the intentions to start their own company. On one hand, the empirical evidence obtained shows a heterogenic effect of the risk dimensions associated with entrepreneurship on the perceived desirability and feasibility in their behaviour. Therefore, it was found that the economic risk associated with entrepreneurship has a negative effect on the feasibility to start a business, but does not significantly influence the desirability of that behaviour. On the other hand, a significant effect from the risk related to health is not seen on desirability and feasibility, but the negative influence of personal risk is empirically supported for both variables. Finally, the results obtained related to social and time risk are contradictory. Social risk negatively influences entrepreneurship desirability, but a positive effect is observed on the feasibility to create a business. For its part, the empirical evidence obtained does not support any effect of the time risk on the perceived feasibility of starting a business, but there is a positive on entrepreneurship desirability. These results, which are contrary to the traditional concept of risk as a barrier to entrepreneurship, are justified by the vocational nature of this behaviour and by the social sacrifices that are sometimes necessary to be able to make a business work.     

Marriage between credit cards and the Internet: Buying is just a click away!

This paper examines whether Internet access positively affects credit card balances. To that end, we compare the 2010 and 2013 Surveys of Consumer Finances, analyze the consistency of the results over time, and provide the rationale for any resulting differences. Using the censored techniques, our results indicate that Internet access has a positive effect on credit card balances, which suggests that consumers with Internet access are prone to higher balances compared to those without. The probability of carrying positive balances was larger in 2010 compared to 2013. Overall, the results suggest that, while the financial crisis might have contributed to higher balances in 2010, the economic recovery afterward seems to have eased the burden of credit card debt.     

The effect of task-technology fit on purchase intention: The moderating role of perceived risks

Electronic commerce to date has experienced rapid growth, and online purchases have become very popular among online consumers. To successfully attract online consumers and benefit from doing so, e-tail product providers should learn about consumers’ purchase intention, its antecedents, and moderators. This study proposes a research model of purchase intention using perceived performance risk and perceived privacy risk as moderators based on a perspective of task-technology fit. In the proposed model, purchase intention is positively influenced by three antecedents: task-technology fit, perceived navigation, and perceived reputation. Each model path is moderated by perceived performance risk and perceived privacy risk, respectively. Empirically testing using a survey of 749 registered members (consumers) from the database of Taiwan’s largest e-learning commercial website confirms that task-technology fit, perceived navigation, and perceived reputation positively influence purchase intention. The relationship between task-technology fit, perceived navigation and purchase intention are significantly moderated by the perceived performance risk and perceived privacy risk. Finally, managerial implications and limitations of our findings are discussed.     

The influence of partners' known preferences on auditors' sceptical judgements: The moderating role of perceived social influence pressure

We examine the moderating effect of auditors' perceived social influence pressure on the influence of partners' known preferences on auditors' sceptical judgements in China. We invoke social influence theory to provide complementary insights into the driving forces behind auditors' judgements, over and above the pressure arising from accountability. We hypothesise that the influence of partners' known preferences on auditors' sceptical judgements is stronger for auditors who perceive higher social influence pressure than those who perceive lower pressure. Our results support the hypothesis and establish the value of understanding auditors' perceived social influence pressure in managing partners' communication with audit teams.     

From risk to vulnerability: the role of perceived adaptive capacity for the acceptance of contested infrastructure

Infrastructure projects such as repositories for nuclear waste or hazardous waste sites impose risks (in the form of potential burdens or losses) over extensive timescales. These risks change dynamically over time and so, potentially, does their management. Societies and key actors go through learning processes and subsequently may be better able to deal with related challenges. However, social scientific research on the acceptance of such projects is mainly concerned with (static) risk perception issues and does not include dynamic aspects. Adaptive capacity, which is part of the concept of vulnerability, therefore represents a promising complementing facet for this line of research. The aim of this paper is to examine the role of perceived adaptive capacity (PAC) for the acceptance of contested long-term infrastructure for the two issues of nuclear and hazardous waste. In an online experimental survey (N?=?300) examining either the acceptance of a nuclear waste repository or of a hazardous waste site, we demonstrate that (i) PAC can be separated empirically as a psychological construct from risk and benefit perception, and (ii) PAC explains a significant additional share of variance in the acceptance of both waste types beyond risk and benefit perception. Furthermore, we report what adaptation mechanisms of PAC participants expect to occur in the future. We conclude that such a dynamic perspective yields important insights in understanding individual decision-making regarding long-term infrastructure projects.     

Towards a concept of genetic risk tolerance: a risk analysis perspective

The starting point of the MindTheRisk project has been to raise socio-political questions about whether lay public’s understanding is satisfied about the genetic information they receive, and to what extent regulators do take this aspect on board when they decide to allow or restrict genetic testing or to develop communications about genetic testing. This article draws on the concepts that have emerged among the risk research community to tackle “risk tolerance’’. It explores the application of those concepts to the sharing and regulating of genetic risk information. We start with a conceptualisation of risk acceptability/tolerability in the genetic context, before turning to concrete hurdles that need to be overcome and questions that need to be answered. Finally, we suggest some direction for policy. The paper is based on an in-depth review supplemented by pilot interviews conducted with the European Medicines Agency, National regulatory agencies, academic and members of a patient organisation, all directly involved in policy.     

The valuation of a firm’s investment opportunities: a reduced form credit risk perspective

This paper develops a valuation model for a firm’s investment opportunities. Given standard market imperfections, we show that maximizing the firm’s equity value is consistent with the need to include a capital charge for an investment specific to a firm’s capital structure and in excess of the investment’s market determined risk. A reduced form credit risk perspective is taken to enable a continuous time implementation. This continuous time implementation is illustrated within the paper.      

The regulations for indoor air pollution in Japan: a public health perspective

In recent years public health problems caused by indoor air pollution, known as ‘Sick Building Syndrome in housing’, or ‘Sick House Syndrome’ in Japan, have been drawing strong public concern. After conducting extensive exposure assessment, government authorities have taken effective measures to solve the problem. However, as a result of diversification and increase in quantities of industrial chemicals, existing regulations do not cover enough ranges of various potential hazardous chemicals. Hence, the regulations seek to be changed from hazard‐based regulation to a risk‐based one. Good indoor air quality (IAQ), which does not pose unacceptable health risks from all pollutants affecting indoor air, should be ensured for all public people. The objective of this study is to clarify the remaining issues to be solved urgently, related to the regulations to ensure a good IAQ. We reviewed enormous numbers of the existing governmental and industrial voluntary standards and/or guidelines, literature and documents concerning IAQ research in the past 40 years. Our results showed six subjects from those remaining issues. Based on these subjects we created a new scheme to control the IAQ; we especially regarded a comprehensive labeling system as one of the important strategies.     

The influence of mood on the willingness to take financial risks

The purpose of this study was to determine whether support could be found for either the Affect Infusion Model or the Mood Maintenance Hypothesis regarding how mood influences financial risk tolerance. An ordinary least‐squares regression model was used to determine if people who exhibited a happy mood at the time they completed a survey scored differently than those who were not happy. In a sample (n = 460) of employed mid‐western respondents between the ages of 18 and 75 years, being in a happy mood was positively associated with having a higher level of financial risk tolerance, holding biopsychosocial and environmental factors constant. Support for the Affect Infusion Model was obtained.     

A characterisation of the methodology of qualitative research on the nature of perceived risk: trends and omissions

The issue of how risk is ‘perceived’ is one of significant research interest and immense practical importance. In spite of this wide interest, however, it is probably fair to say that most emerging ‘risk’ crises – whether related to natural or technological phenomena – come as a surprise to researchers and to society as a whole. Prediction of human responses to novel potential hazards (or novel manifestations of old hazards) is neither reliable nor complete; strategies to ameliorate inappropriate concerns when they arise (or to make realistic inappropriate absences of concern) do not appear totally effective. It therefore seems apt to ask the question: just what have we learned about ‘risk perception’? In this paper we conduct a structured review of qualitative research on perceived risk – to be followed by a subsequent analysis of quantitative research in a later paper – focusing upon methodological issues. Qualitative research often precedes quantitative research, and ideally informs it; it seeks depth and meaning from few subjects rather than identifying patterns within larger samples and populations. Without adequate qualitative research, quantitative research risks misanalysis of the target phenomenon, at the very least by the omission of relevant factors and inclusion of irrelevant ones. Our analysis here – of qualitative studies conducted across a range of disciplines, not all of which will be familiar to the readers of this journal – suggests that this research suffers from an incomplete coverage of the ‘risk perception universe’, typified by a focus on atypical hazards and study samples. We summarise the results of this research, while pointing out its limitations, and draw conclusions about future priorities for research of this type.     

The first five years of the EU Impact Assessment system: a risk economics perspective on gaps between rationale and practice

In 2003, the European Commission (EC) started using Impact Assessment (IA) as the main empirical basis for its major policy proposals. The aim was to systematically assess ex ante the economic, social and environmental impacts of European Union (EU) policy proposals. In parallel, research proliferated in search for theoretical grounds for IAs and in an attempt to evaluate empirically the performance of the first sets of IAs produced by the EC. This paper combines conceptual and evaluative studies carried out in the first five years of EU IAs. It concludes that the great discrepancy between rationale and practice calls for a different theoretical focus and a higher emphasis on evaluating empirically crucial risk economics aspects of IAs, such as the value of statistical life, price of carbon, the integration of macroeconomic modelling and scenario analysis.     

The risk of a currency swap: a multivariate-binomial methodology

In general, the risk of a financial instrument on a future valuation date depends on several stochastic variables. In the case of a currency swap, its value on a future date, can be modelled as a function of five stochastic variables. These represent the factors that determine the term structure of interest rates in the two currencies, and the foreign exchange rate between the currencies. The joint-probability distribution of the relevant variables on the horizon date is approximated by a multivariate-binomial distribution. The proposed methodology provides a fast and flexible alternative to Monte-Carlo simulation of the swap value. The distributions of value produced by the method can be employed to assist with both market and credit risk management.     

The influence of litigation risk and internal audit source on reliance decisions

External auditor reliance on the work of internal auditors in an integrated audit of the financial statements and internal control is an important audit planning procedure that can impact audit efficiency and effectiveness. The purpose of this study is to examine how perceived auditor litigation risk and internal audit source affect external auditors' reliance decisions in an integrated audit environment under varying levels of risk of material misstatement. In an experimental study using 89 practicing Big 4 auditors, this study finds that auditors who perceive low litigation risk from placing reliance on the work of internal auditors will rely more on outsourced internal auditors than in-house internal auditors. The results also show that auditors' reliance decisions are sensitive to the level of account risk consistent with the risk-based approach to the integrated audit encouraged by the PCAOB.     

The influence of linear and cyclical temporal representations on risk perception of nuclear waste: an experimental study

Time is an important aspect of the issue of nuclear waste, both from a technical and from a perceptional perspective. Previous studies have investigated the relationship between time and risk perception of nuclear waste, applying the discounting paradigm and therefore limiting time to one very narrow aspect: its duration. However, time is a multifaceted concept and encompasses more than a linear property. The aim of our study is to test the influence of a different aspect of time, namely temporal representations (linear or cyclical) on risk perception of nuclear waste. In an experimental study we demonstrate that both linear and cyclical representations have a reducing effect on risk perception compared to the control condition, where no specific time representation was activated. Examining group differences, we also demonstrate that temporal representations have a differing influence depending on whether participants have a stable belief about nuclear waste or whether they belong to an ambivalent group that does not yet hold a stable belief. Furthermore, we replicate the well-documented gender gap in risk perception. Our results bear potentially interesting implications for risk communication by demonstrating a causal relationship between the graphic representation of time and risk perception of nuclear waste.     

The constitutive element of probabilistic agency in risk: a semantic analysis of risk,danger, chance,and hazard

Defining central concepts with accuracy is crucial to any scientific discipline. A recent debate over risk definitions in this journal illustrates the far reaching consequences of divergent definitions. Aven and Renn define risk as a social construct while Rosa defines risk as an ontological fact. Both claim that their definition reflects the common usage of the word risk. Through a semantic analysis this paper points to a constitutive element of what is termed probabilistic agency in the risk concept. In this respect, risk is distinct from danger, and because Rosa’s main argument is based on the apparent synonymy between risk and danger, the premises for his risk ontology are not valid. The paper furthermore argues that Aven and Renn’s attempt to bridge between epistemology and ontology is based on a distinction between a conceptual level of risk and its practical application which is impossible to uphold if a risk definition is to be in accordance with the ordinary usage of the word. The paper concludes by arguing that risks are only real within a subjective ontology.     

The impact of climate risk on earnings management: International evidence

This study explores the influence of climate risk on properties of firms’ financial reporting practices with observations collected from 64 countries between 2005 and 2016. We use a country-level climate risk indicator developed by Germanwatch to measure the degree of damage from extreme weather events, and find that climate risk positively influences firms’ engagements in both accruals-based and real earnings management. Furthermore, we document that the above-mentioned effects of climate risk are moderated by the quality of country-level public governance. Subsample analysis suggests that the main effect of climate risk on earnings management is more pronounced for firms from developed countries, for firms in environment-sensitive industries, and for firms reporting losses. Our findings, which are supported by a battery of robustness tests, have important implication for regulators and policymakers.     

The relationship between risk experience and risk response: a study of farmers and climate change

Within the existing literature, the role of experience of risk on attitudinal and behavioural risk response has been relatively neglected. Recent research that draws on the psychological distance of climate change as a concept notes the importance of local, significant experience as a driver for encouraging appropriate response. The experience of flooding was used as the stimulus in this paper, and emphasis placed on whether direct and/or indirect experience of flood risk is associated with different responses to climate change risk. In order to explore the relationship between climate change risk experience and response in the form of on-farm mitigation and adaptation, this paper draws on a case study of farmers in England, many of whom have experienced flooding. Results from a quantitative survey undertaken with 200 farmers in Gloucestershire, England are discussed. Statistical analysis found experience of flooding to be significantly associated with a heightened concern for climate change. Although also finding an association between experience and behavioural response, the sample were most likely to be taking adaptive behaviour as part of normal practice, with factors such as lack of overall concern for climate change risk and absence of information and advice likely to be the main barriers to action. Risk communication needs to further emphasise the connection between climate change and extreme weather events to allow for farmers to perceive climate change as a relevant and locally salient phenomenon, and subsequent tailored information and advice should be offered to clearly illustrate the best means of on-farm response. Where possible, emphasis must be placed on actions that also enable adaptation to other, more immediate risks which farmers in this study more readily exhibited concern for, such as market volatility.     

The cost of equity of internet stocks: a downside risk approach

Beta as a measure of risk has been under fire for many years. Although practitioners still widely use the CAPM to estimate the cost of equity of companies, they are aware of its problems and are looking for alternatives. A possible alternative is to estimate the cost of equity based on the semideviation, a well-known and intuitively plausible measure of downside risk. Complementing evidence reported elsewhere about the ability of the semideviation to explain the cross-section of returns in emerging markets and that of industries in emerging markets, this article reports results showing that the semideviation also explains the cross-section of Internet stock returns.     

The new political importance of the old hurricane risk: a contextual approach to understanding contemporary struggles with hurricane risk and insurance

In the United States, policy-makers struggle to resolve conflict between public demands for affordable insurance costs covering hurricanes and market demands for risk-based insurance pricing. Given the socially constructed nature of risk, a risk-based pricing approach prioritizes insurer values and business practices over all societal value goals expressly limiting democratic inclusion in decision-making about risk. As a step towards the more democratically inclusive approach of risk governance, this article uses the state of Florida as a case study to provide a narrative of the social and political context for the evolution of the idea of U.S. hurricane risk. I argue that today’s hurricane risk is a product of long-standing shared efforts to build prosperity. However, it is no longer a simple risk for society to overcome on its way to economic well-being. Contemporary hurricane risk is systemic and serves as a nexus for political battles over American values.     

The influence of disclosure policy on analyst behavior: The case of segment data

More transparent disclosure reduces the effort required to process reported information. The adoption of Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, increased the transparency of segment information reported by diversified firms. Using a long sample window (1988–2007) and a difference-in-difference design, this paper examines the association between corporate diversification and analysts' efforts—as reflected in analysts' idiosyncratic information precision and analyst consensus—across the old SFAS No. 14 and the new SFAS No. 131 segment reporting regime. Results indicate that SFAS No. 131 has improved segment reporting such that analysts need to invest relatively less effort generating idiosyncratic information when issuing forecasts for diversified firms. Given that analysts' information gathering efforts are costly, these findings are of interest to policy makers when assessing whether the intended reporting objectives of SFAS No. 131 are being met in a cost effective manner.