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The Impact of Risk-taking on Firm Volatility

In: Asia-Pacific Contemporary Finance and Development

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  • See-Nie Lee

Abstract

We investigate the link between firm volatility and risk-taking (RT) among 4232 institutions across 11 countries during the period of 2000–2017 and find RT is negatively correlated with volatility measures. Second, a decomposition of the primary risk measure, theZscore and Merton distance-to-default, reveals that high RT contributed to lower stock return volatility mainly through better corporate governance, firm size, higher information efficiency, and strong BOD. Third, Australia firms engage in more RT compared to other countries. Finally, majority of the selected countries show the negative impact of RT in firm volatility in the pre-crises period (2002–2006) and during the crises period (2007–2009) but not in the post-crises period (2010–2014).

Suggested Citation

  • See-Nie Lee, 2019. "The Impact of Risk-taking on Firm Volatility," International Symposia in Economic Theory and Econometrics, in: Asia-Pacific Contemporary Finance and Development, volume 26, pages 165-199, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-038620190000026009
    DOI: 10.1108/S1571-038620190000026009
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