Financial risk

About: Financial risk is a research topic. Over the lifetime, 11899 publications have been published within this topic receiving 231404 citations. The topic is also known as: economic risk.

Sustainable Entrepreneurship: The Role of Perceived Barriers and Risk

Abstract: Entrepreneurs who start a business to serve both self-interests and collective interests by addressing unmet social and environmental needs are usually referred to as sustainable entrepreneurs. Compared with regular entrepreneurs, we argue that sustainable entrepreneurs face specific challenges when establishing their businesses owing to the discrepancy between the creation and appropriation of private value and social value. We hypothesize that when starting a business, sustainable entrepreneurs (1) feel more hampered by perceived barriers, such as the institutional environment and (2) have a different risk attitude and perception than regular entrepreneurs. We use two waves of the Flash Eurobarometer survey on entrepreneurship (2009 and 2012), which contains information on start-up motivations, start-up barriers, and risk perceptions of approximately 3000 (prospective) business owners across 33 countries. We find that sustainable entrepreneurs indeed perceive more institutional barriers in terms of a lack of financial, administrative, and informational support at business start-up than regular entrepreneurs. Further, no significant differences between sustainable and regular entrepreneurs are found in terms of their risk attitudes or perceived financial risks. However, sustainable entrepreneurs are more likely to fear personal failure than regular entrepreneurs, which is explained by their varied and complex stakeholder relations. These insights may serve as an important signal for both governments and private capital providers in enhancing the institutional climate.

Show Me the Honey! Effects of Social Exclusion on Financial Risk-Taking

Abstract: This research examines the effects of social exclusion on a critical aspect of consumer behavior, financial decision-making. Specifically, four lab experiments and one field survey uncover how feeling isolated or ostracized causes consumers to pursue riskier but potentially more profitable financial opportunities. These daring proclivities do not appear driven by impaired affect or self-esteem. Rather, interpersonal rejection exacerbates financial risk-taking by heightening the instrumentality of money (as a substitute for popularity) to obtain benefits in life. Invariably, the quest for wealth that ensues tends to adopt a riskier but potentially more lucrative road. The article concludes by discussing the implications of its findings for behavioral research as well as for societal and individual welfare.

Financial crises, payment system problems, and discount window lending

Abstract: In a developed economy, financial crises are rapidly conveyed to the payment system, which tends to rely on private credit extensions in most countries. While many authors recommend that the central bank do no more than provide adequate aggregate liquidity during a crisis, this policy requires well-functioning private credit markets to channel liquidity to solvent, but illiquid, firms. This paper presents a model of private lending which defines a crisis as a time when lenders become uncertain about how to assess financial risks and, therefore, rationally withdraw from making new loans. In such an environment, a government lender of last resort can improve social welfare. Copyright 1996 by Ohio State University Press.(This abstract was borrowed from another version of this item.)

On the Relationship between Systematic Risk and the Degrees of Operating and Financial Leverage

Abstract: In order to use the capital asset pricing model (CAPM) to make operating and financial decisions, financial managers must confront the problem of estimating a security's systematic risk, or what commonly is termed beta (3) One approach to this problem is to estimate / by regressing the time series of a security's realized financial return (dividend plus capital gain or loss) on the contemporaneous realized financial return on a market portfolio Such a procedure is suspect for three reasons First, there is evidence that ,Ss of individual securities are not stationary [3, 4, 7, 9] Second, this procedure cannot be undertaken when historical information is not readily available, as might be the case in evaluating new product decisions Third, it masks the important fact that firms make decisions about how to operate in the factor and product markets of the real economic sector As Myers [20] points out, the actions taken as a result of these decisions generate a real return composed of an immediate cash flow plus any change in the present value of future investment opportunities The regression procedure, though, uses the realized financial returns generated in the financial sector of the economy to calculate / It therefore provides no knowledge of the real determinants of/ from the underlying characteristics of the real assets Moreover, financial managers cannot look to the CAPM to find clues for estimating ,B on the basis of real variables As a theory of financial market behavior, the CAPM states only a necessary equilibrium relationship between the prices of securities given their stochastic characteristics over a period of time It says little about how stock prices are determined by the real variables that financial managers must consider in evaluating strategic, operating, and financial alternatives The studies that seek to provide financial managers with knowledge of the real determinants of systematic risk are numerous There are those that empirically test intuitive specifications between real variables and / [2,