Using a news-based index of aggregate policy uncertainty in the US economy, we document a strong negative relation between policy uncertainty and corporate risk-taking. We show that high levels of policy uncertainty are associated with significantly lower future stock return volatility at the...

This study examines the effect of the use of Asset-backed Securitisation (ABS) on corporate risk-taking. After careful consideration of self-selection bias and endogeneity, we find that the use of ABS is positively associated with corporate risk-taking. More borrowing through ABS economically...

Risk is a vital concept to grasp when investing in a firm or project. It is also a key ingredient required to evaluate the cost of capital and perform a valuation. An organization’s capital structure, specifically the amount of leverage and debt financing employed, must be accounted for to...

In this study, we show that managerial heterogeneity plays an important role in firm decisions. Our view is that in addition to the effects of previously examined determinants, firm decisions are affected not just by the managers’ explicit mandate to maximize firm value, but also by the...

Institutional investors pay considerable attention to the quality of a company's governance. Unfortunately, it is difficult for outside observers to reliably gauge governance quality. Oftentimes, poor governance manifests itself only after decisions have been made and their outcomes known. We...

We prove that the use of the risk-adjusted rate (RAR) for compounding and discounting outflows conflicts irremediably with risk aversion. It is correct for inflows. Our correction respects the impact of risk on outflows; it conforms to risk aversion. It solves many unsolved issues. Our examples...

This article examines how governance, culture, and risk management affect risk taking in banks. It distinguishes between good risks, which are risks that have an ex ante private reward for the bank on a standalone basis, and bad risks, which do not have such a reward. A well-governed bank takes...

Using textual analysis of earnings conference calls, we quantify firms' supply chain risk and its sources. Our proxy for supply chain risk exhibits large cross-sectional and time-series variation that aligns with reasonable priors and is unprecedently high during the Covid-19 pandemic. In...

Using textual analysis of earnings conference calls, we quantify firm level risk arising from the reliability of the supply chain from 2002 to 2020. Our proxy for perceived supply chain risk exhibits cross-sectional and time-series variation that aligns with reasonable priors and is...

Research has shown that firms with overconfident chief executive officers (CEOs) tend to overinvest and are exposed to high risks due to unrealistically optimistic estimates of their firms’ future performance. This study finds evidence that overconfident CEOs also affect suppliers’ risk...