Modelling the Risk and Reward Trade-off for SMEs: A Case Study

Madhu Acharyya () and John Houston ()
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Madhu Acharyya: Glasgow Caledonian University
John Houston: Stirling Management School, University of Stirling

A chapter in Risk Management, 2022, pp 61-94 from Springer

Abstract: Abstract While there is a well-developed literature that investigates risk-reward trade-offs in large corporations, there is less so for smaller, ‘independent’ firms. Neither is there an abundance of studies into the ‘agency problem’ in such smaller firms, and what impact it may have on attitudes to risks and rewards at different levels of such organisations. In this chapter, the data from a survey conducted on the owners and staff of a family-owned company headquartered in Singapore are used to ascertain the extent of significant differences in attitudes to specific risks and rewards, between the two groups. Respondents were asked to judge the importance to them of 150 different risk/reward factors and an ordered logit model was used to ascertain the significance of their role in the company in scoring their significance. We find that, in general, the owners and managers and staff exhibited the same attitudes, though there are some interesting differences between them, though there are no obvious patterns where they exist.

Keywords: Risk-reward paradox; Agency problem; Small- and medium-sized enterprises (SMEs); Likert scores; Ordered logit models (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:rischp:978-3-030-88374-4_4

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DOI: 10.1007/978-3-030-88374-4_4

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