corporate risk-taking decisions. Higher taxes reduce expected profits more for risky projects than for safe ones, as the … government shares in a firm's upside but not in its downside. Consistent with this prediction, we find that risk taking is … sensitive to taxes, albeit asymmetrically: the average firm reduces risk in response to a tax increase (primarily by changing …

Transaction costs in trading involve both risk and return. The return is associated with the cost of immediate … execution and the risk is a result of price movements during a more gradual trading. The paper shows that the trade-off between … risk and return in optimal execution should reflect the same risk preferences as in ordinary investment. The paper develops …

Mutual funds change their risk levels significantly over time. This paper investigates the performance consequences of … risk shifting, as well as the economic motivations and the mechanisms of risk shifting. Using a holdings-based measure of … risk shifting, we find that funds that increase risk perform worse than funds that keep stable risk levels over time. In …

This paper examines how governance and risk management affect risk-taking in banks. It distinguishes between good risks … such a reward. A well-governed bank takes the amount of risk that maximizes shareholder wealth subject to constraints … cost effective to do so. The role of risk management in such a bank is not to reduce the bank's total risk per se. It is to …

require greater risk-taking than more incremental approaches. To understand how managers respond to uncertainty when making … projects. The results suggest that the risk preferences of managers in charge of research investments may have an oversized … rewards that disproportionately encouraged the choice of higher-risk projects. Despite these incentives, most participants …

We study the relationship between compensation and risk-taking among finance firms using a neglected insight from … principal-agent contracting with hidden action and risk-averse agents. If the sensitivity of pay to stock price or slope does … not vary with stock price volatility, then total compensation has to increase with firm risk to satisfy as agent …

, as the extreme payoffs become more likely CEOs exhibit greater aversion to risk. Our results suggest that use of the … expected utility paradigm in decision making substantially underestimates society's willingness to pay to reduce risk in small …

We propose a model where investors hire fund managers to invest either in risky bonds or in riskless assets. Some … managers have superior information on the default probability. Looking at the past performance, investors update beliefs on … their managers and make firing decisions. This leads to career concerns which affect investment decisions, generating a …

We examine how an increase in stock option grants affects CEO risk-taking. The overall net effect of option grants is … theoretically ambiguous for risk-averse CEOs. To overcome the endogeneity of option grants, we exploit institutional features of … increase in new options granted leads to a 2.8-4.2 percent increase in equity volatility. This increase in risk is driven …

aggregate risk. We propose a theory to explain these risk exposures. We study a financial accelerator model where entrepreneurs … inefficiently high risk exposure for entrepreneurs …