Agency Influences on Risk Reduction and Operating Performance: An Empirical Investigation Among Strategic Groups
Department
Management and Entrepreneurship
Document Type
Article
Publication Date
7-1997
Abstract
The relationships between risk and performance were tested employing within and between analyses at the level of strategic groups in three different industries. As hypothesized, systematic risk did not exhibit a consistent relationship with performance. By contrast, all of the total correlations, the between-group correlations, and the within-group correlations of total risk with performance were in the hypothesized negative direction. These findings suggest that when risk-averse managers reduce total risk, the firm's carnings performance is enhanced. The hypothesized differences between strategic groups in total risk were evident primarily in the computer and pharmaceutical industries. Performance also differed across strategic groups in these two industries, as well as among airlines. Contrary to expectations, systematic risk also differed across strategic groups in all three industries. These ANOVA results indicate that differences in strategic profiles between strategic groups engender differences in total risk, systematic risk, and performance.
Journal Title
Journal of Business Research
Journal ISSN
0148-2963
Volume
39
Issue
3
First Page
219
Last Page
230
Digital Object Identifier (DOI)
10.1016/S0148-2963(96)00206-8