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A risk–return trade‐off or co‐movement? Are food processing firms risk‐averse?

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  • Subhadip Mukherjee
  • Soumyatanu Mukherjee
  • Mamata Parhi
  • Kun Duan
  • Ahmed Usman

Abstract

We build a two‐moment decision‐theoretic framework to study how firms in the food‐processing industry negotiate between risk and return while relying on imported inputs for production at an intensive margin. Two possibilities emerge: either a co‐movement or a trade‐off in risk and return under various industry and economic conditions. Building on our theoretical setting, we design a testable empirical framework that considers a panel of 316 firms in the Indian food‐processing industry between 1993 and 2009. We find strong evidence of a decrease in the absolute risk aversion preference, although the magnitude varies measurably across firms.

Suggested Citation

  • Subhadip Mukherjee & Soumyatanu Mukherjee & Mamata Parhi & Kun Duan & Ahmed Usman, 2024. "A risk–return trade‐off or co‐movement? Are food processing firms risk‐averse?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2176-2192, April.
    • Handle: RePEc:wly:ijfiec:v:29:y:2024:i:2:p:2176-2192
    DOI: 10.1002/ijfe.2763
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