Why Managers and Companies Take Risks

1. Front Matter

   Pages I-X

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2. Introduction

   Pages 1-19

3. Theory of Risk and Decision Making in Management

   Pages 21-39

4. Behavioural Evidence on Risk and Decision Making

   Pages 41-61

5. Real-World Decision Making Under Risk

   Pages 63-89

6. Risk-Taking and Organisation Performance

   Pages 91-113

7. Published Models of Decision Making Under Risk

   Pages 115-147

8. Why Managers Take Risks

   Pages 149-184

9. How Companies Control Risks

   Pages 185-224

10. Summary and Discussion

    Pages 225-247

11. Risk Budget Theory

    Pages 249-276

12. Conclusions

    Pages 277-290

13. Back Matter

    Pages 291-349

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This book uses risk in its dictionary meaning as the probabiHty of an unde­ sirable outcome, and has two research questions: when managers make de­ cisions, what leads them to choose a risky alternative? and: what deter­ mines whether the decision proves correct? Answers to these questions form a model of decision making that explains the process and results of managers' risk-taking in the real world. There is an extensive literature on risk and decision making because the topic has been of interest in many disciplines since at least the 18^^ century. Thus insights on the research questions are available from studies of ani­ mals, humans and organisations; and have been drawn by scholars in biol­ ogy, psychology, finance and management. Even so, there is a large gap as most studies are conducted away from corporate settings and use subjects with limited decision experience. The few studies set in real-world condi­ tions tend to concentrate on just a single aspect of decision makers' attrib­ utes, setting and behaviour, and on either decision choices or outcomes. The empirical work in this book is designed to fill part of this gap.

• Corporate Governance
• Decision Making
• Risks
• management
• organization
• performance

• Department of Finance, The University of Melbourne, Parkville, Australia

  Les Coleman