Some Determinants of Corporate Risk Aversion

J. Eric Bickel ()
Additional contact information
J. Eric Bickel: Department of Industrial and Systems Engineering, Texas A&M University, 236B Zachry Engineering Center, 3131 TAMU, College Station, Texas 77843-3131

Decision Analysis, 2006, vol. 3, issue 4, 233-251

Abstract: In this paper we roughly quantify the degree of risk aversion induced by three rationales for corporate risk management: the cost of financial distress, costly external finance, and the principal-agent relationship between shareholders and management. In so doing, we provide a foundation for the use of corporate utility functions. However, we are unable to fully support the degree of risk aversion reported in the decision analysis literature. Specifically, financial distress and costly external finance appear to induce relatively little risk aversion, while principal-agent concerns lend only partial support to published corporate risk tolerance guidelines.

Keywords: utility; utility functions; corporate utility functions; corporate risk tolerance; corporate risk aversion (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://dx.doi.org/10.1287/deca.1060.0080 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ordeca:v:3:y:2006:i:4:p:233-251

Access Statistics for this article

More articles in Decision Analysis from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().