Why Are Successive Cohorts of Listed Firms Persistently Riskier?

Anup Srivastava and Senyo Y. Tse

European Financial Management, 2016, vol. 22, issue 5, 957-1000

Abstract: Prior studies show that the risk level of each new cohort of listed firms is higher than its predecessor's. We find that these risk differences are persistent and investigate two potential explanations: (1) Each cohort adopts and retains operating innovations that are associated with higher risks, and (2) increasing numbers of younger and less†experienced firms are represented in each new cohort. Our results support the first explanation. Each new cohort uses riskier production technologies and operates in more competitive product markets than its predecessor.

Date: 2016
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