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Corporate Risk Culture

62 Pages Posted: 17 Oct 2015 Last revised: 2 Sep 2016

Yihui Pan

University of Utah - Department of Finance

Stephan Siegel

University of Washington - Michael G. Foster School of Business

Tracy Yue Wang

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: August 31, 2016

Abstract

We examine the formation and evolution of corporate risk culture, i.e., the preferences towards 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, while cross-sectional differences in founders' risk attitudes, i.e., firms' initial risk culture, contribute to differences across firms in persistent firm policies, such as R&D intensity.

Keywords: corporate culture, cultural heritage, risk preference, uncertainty avoidance, corporate investment, CEO selection, directors, executives

Suggested Citation

Pan, Yihui and Siegel, Stephan and Wang, Tracy Yue, Corporate Risk Culture (August 31, 2016). Available at SSRN: https://ssrn.com/abstract=2675594

Yihui Pan

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Stephan Siegel (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://faculty.washington.edu/ss1110/

Tracy Yue Wang

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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