Risk propensity and firm performance: A study of the petroleum exploration industry

Management Science

Volumn 42, Issue 7, 1996, Pages 1004-1021

  Walls, Michael R ^a   Dyer, James S ^a  

^a NONE

Author keywords

Business Strategy; Certainty Equivalents; Decision Analysis; Exponential Utility; Firm Performance; Risk Management; Risk Tolerance

Indexed keywords

DECISION THEORY; INDUSTRIAL ECONOMICS; INDUSTRIAL MANAGEMENT; MATHEMATICAL MODELS; PERFORMANCE; PETROLEUM PROSPECTING; PUBLIC POLICY; RISKS; STRATEGIC PLANNING;

BUSINESS STRATEGY; CERTAINTY EQUIVALENTS; EXPONENTIAL UTILITY; FIRM PERFORMANCE; PETROLEUM EXPLORATION INDUSTRY; RISK MANAGEMENT; RISK PROPENSITY; RISK TOLERANCE RATIO;

PETROLEUM INDUSTRY;

EID: 0030196159     PISSN: 00251909     EISSN: None     Source Type: Journal    
DOI: 10.1287/mnsc.42.7.1004     Document Type: Article

References (44)

1. Amit, R. and B. Wernerfelt, "Why Do Firms Reduce Business Risk?," Acad. Management J., 33, 3 (1990), 520-533.
2. Bettis, R. A. and W. K. Hall, "Diversification Strategy, Accounting Determined Risk and Accounting Determined Return," Acad. Management J., 25 (1982), 254-264.
3. Bettis, R. A., "Performance Differences in Related and Unrelated Diversified Firms," Strategic Management J., 2 (1981), 379-393.
4. Bowman, E. H., "A Risk/Return Paradox for Strategic Management," Sloan Management Rev., 21, 3 (1980), 17-31.
5. _, "Risk Seeking by Troubled Firms," Sloan Management Rev., 23, 4 (1982), 33-42.
6. _, "Content Analysis of Annual Reports for Corporate Strategy and Risk," Interfaces, 14 (1984), 61-71.
7. Brockett, P. L., W. W. Cooper, K. Kwon and T. W. Ruefli, "Broker and Financial Newsletter Editor Perceptions of Risks and Returns for Mutual Fund Investment Strategies," Working Paper, University of Texas at Austin, Austin, TX, 1990.
8. Bromiley, P., "Testing a Causal Model of Corporate Risk Taking and Performance," Acad. Management J., 34, 1 (1991), 37-59.
9. Collins, J., Strategic Risk: An Ordinal Approach, Unpublished Dissertation, The University of Texas at Austin, Austin, TX, 1991.
10. Cozzolino, J., "A Simplified Utility Framework for the Analysis of Financial Risk," Economics and Evaluation Symposium of the Society of Petroleum Engineers, Dallas, TX, 1977.
11. Dyer, J. S. and R. N. Lund, "Tinker Toys and Christmas Trees: Opening a New Merchandising Package for Amoco Oil Company," Interfaces, 12, 6 (1982), 38-52.
12. _, _, J. B. Larsen, V. Kumar and R. P. Leone, "A Decision Support System for Prioritizing Oil and Gas Exploration Activities," Oper. Res., 38, 3 (1990), 386-396.
13. Figenbaum, A. and H. Thomas, "An Examination of the Structural Stability of Bowman's Risk-return Paradox," Acad. Management Proceedings, (1985), 7-11.
14. Green, P. E., "Risk Attitudes and Chemical Investment Decisions," Chemical Engineering Progress, 59 (1963), 35-40.
15. Greenwald, B. C. and J. E. Stiglitz, "Asymmetric Information and the New Theory of the Firm: Financial Constraints and Risk Behavior," American Economic Rev., 80, 2 (1990), 160-165.
16. Hackett, J. T., "Concepts and Practice of Agency Theory with the Corporation," in E. I. Altman and M. G. Subrahmanyam (Eds.), Recent Advances in Corporate Finance, Richard Irwin, Homewood, IL, 1985.
17. Hays, R. H. and W. J. Abernathy, "Managing Our Way to Economic Decline," Harvard Business Rev., 58, 4 (1980), 67-77.
18. Howard, R. A., "Decision Analysis: Practice and Promise," Management Sci., 34, 6 (1988), 679-695.
19. _, "Risk Preference," in R. A. Howard and J. E. Matheson (Eds.), The Principles and Applications of Decision Analysis, Volume II, Strategic Decisions Group, Menlo Park, CA, 1984, 629-663.
20. Jensen, M. C. and R. Ruback, "The Market for Corporate Control: The Scientific Evidence," J. Financial Economics, 11 (1983), 5-50.
21. Kahneman, D. and A. Tversky, "Prospect Theory: An Analysis of Decision Under Risk," Econometrica, 47 (1979), 263-291.
22. Keeney, R. L. and H. Raiffa, Decisions with Multiple Objectives: Preferences and Value Tradeoffs, John Wiley & Sons, New York, 1976.
23. Kohler, H., Statistics for Business and Economics. Scott, Foresman and Company, Glenview, IL, 1985.
24. Loescher, S. M., "Bureaucratic Measurement, Shuttling Stock Shares, and Shortened Time Horizons: Implications for Economic Growth," Quarterly Rev. Economics and Business, 24 (1984), 1-23.
25. Luce, R. D. and H. Raiffa, Games and Decisions, Wiley Publishing Co., New York, 1957.
26. MacCrimmon, K. and D. Wehrung, Taking Risks: The Management of Uncertainty, The Free Press, New York, 1986.
27. March, J. G. and Z. Shapira, "Managerial Perspectives on Risk and Risk-Taking," Management Sci., 33 (1987), 1404-1418.
28. Mendenhall, W., R. Scheaffer and D. Wackerly, Mathematical Statistics with Applications, Duxbury Press, Boston, MA, 1986.
29. Montgomery, C. A. and H. Singh, "Diversification Strategy and Systematic Risk," Strategic Management J., 5 (1984), 181-191.
30. Newendorp, P. D., Decision Analysis for Petroleum Exploration, Pennwell, Tulsa, OK, 1975.
31. Pratt, J. W., "Risk Aversion in the Small and the Large," Econometrica, 32 (1964), 122-136.
32. Raiffa, H., Decision Analysis: Introductory Lectures on Choices Under Uncertainty. Addison-Wesley, Reading, MA, 1968.
33. Ruefli, T. W. and C. L. Wilson, "Ordinal Time Series Methodology for Industry and Competitive Analysis," Management Sci., 33, 5 (1987), 640-661.
34. _, "Mean-variance Approaches to Risk-return Relationships in Strategy: Paradox lost," Management Sci., 36, 3 (1990), 368-380.
35. _, "The Distribution of Firm Returns and Mean-variance Approaches to Risk and Return: An Empirical Analysis," Working Paper, University of Texas at Austin, Austin, TX, 1991.
36. Singh, J. V., "Performance, Slack, and Risk Taking in Organizational Decision Making," Acad. Management J., 29 (1986), 562-585.
37. Smith, J. E. and R. F. Nau, "Valuing Risky Projects: Option Pricing Theory and Decision Analysis," Management Sci., 41, 5 (1995), 795-816.
38. Spetzler, C. S., "The Development of a Corporate Risk Policy for Capital Investment Decisions," IEEE Transactions on Systems Science and Cybernetics Institute of Electrical and Electronics Engineers SSC-4,1968.
39. Swalm, R. O., "Utility Theory-insights into Risk Taking," Harvard Business Rev., 44 (1966), 123-136.
40. von Neumann, J. and O. Morgenstern, Theory of Games and Economic Behavior, 3rd Edition, Princeton University Press, Princeton, NJ, 1953.
41. Walls, M. R., G. T. Morahan and J. S. Dyer, "Decision Analysis of Exploration Opportunities in the Onshore US at Phillips Petroleum," Interfaces, 25, 6 (1995), 39-56.
42. Warner, J. B., "Bankruptcy Costs: Some Evidence," J. Finance, 32 (1977), 337-348.
43. Wehrung, D. A., "Risk Taking over Gains and Losses: A Study of Oil Executives," in P. C. Fishburn and I. H. LaValle (Eds.), Choice Under Uncertainty. Annals of Operations Research, Vol. 19, J. C. Baltzer Scientific Publishing Company, Basel, Germany, 1989.
44. Woo, C. W., "Path Analysis of the Relationship Between Market Share, Business Lend Conduct and Risk," Strategic Management J., 8 (1987), 149-168.