Disentangling Risk and Change

By Aleksandra J. Kacperczyk, Christine M. Beckman, Thomas P. Moliterno. 2015

139 citations recorded by the source corpus.

Using data on 3,225 actively managed U.S. mutual funds from 1980 to 2006, we test hypotheses designed to disentangle risk and change as outcomes of behavioral performance feedback routines. We theorize that managers make decisions involving risk and decisions involving change under different conditions and motivated by different concerns. Our results show internal social comparison across units within a firm will motivate risk, whereas external social comparison across firms will motivate change. When a fund experiences a performance shortfall relative to internal social comparison, the manager is likely to make decisions that involve risk because the social and spatial proximity of internal comparisons trigger individual concern and fear of negative individual consequences, such as job loss. In contrast, when a fund experiences a performance shortfall in comparison with external benchmarks, the manager is more likely to consider the shortfall an organizational concern and make changes that do not necessarily involve risk. Although we might assume that negative performance in comparison with both internal and external benchmarks would spur risky change, our results indicate that risky change occurs most often when a decision maker receives unfavorable internal social performance feedback and favorable external social performance feedback. By questioning assumptions about why and when organizational change involves risk, this study begins to separate change and risk outcomes of the decision-making process.

Subfields: Accounting, Finance, Safety Research

View Paper: https://www.semanticscholar.org/paper/55d0b6eca87dc9f32426ccae94ad8e0354ef0fb0

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Yan Chen
2. Thomas G. Lechler
3. Serhan Kotiloglu

In Finance

1. Yan Chen
2. Thomas G. Lechler
3. Serhan Kotiloglu

In Safety Research

1. Yan Chen
2. Thomas G. Lechler
3. Serhan Kotiloglu

Citations in the corpus

• Organizational responses to performance feedback: A meta-analytic review (2019, background): “Instead, they are more likely to carry on with what appears to have worked when performance was below aspirations, albeit at a diminishing rate (Greve, 2003b; Kacperczyk et al., 2014; Lehman and Hahn, 2013).”