Toward a strategic theory of risk premium: Moving beyond CAPM

Sayan Chatterjee, Michael Lubatkin and William S. Schulze
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Sayan Chatterjee: Case Western Reserve University [Cleveland]
Michael Lubatkin: UCONN - University of Connecticut, EM - EMLyon Business School
William S. Schulze: UCONN - University of Connecticut

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Abstract: We propose a framework of risk premium that offers a resolution to CAPM's challenge to the field of strategy. Our core assumption is that investors bear firm-specific risk because they are not as diversified and markets not as perfect as CAPM assumes. We therefore hypothesize that investors require lower risk premiums from firms that are able to reduce firm-specific risk, and we ground this prediction on theories from information economics, risk management, and strategy, as well as recent empirical challenges to CAPM.

Date: 1999-07-01
Note: View the original document on HAL open archive server: https://hal.science/hal-02276725
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Published in Academy of Management Journal, 1999, 24 (3), 556-567 p. ⟨10.2307/259142⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02276725

DOI: 10.2307/259142

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