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Corporate Risk Culture

  • Yihui Pan, Stephan Siegel and Tracy Yue Wang


We examine the formation and evolution of corporate risk culture, that is, the preferences toward risk and uncertainty shared by a firm’s leaders, as well as its effect on corporate policies. We document persistent commonality in risk attitudes inside firms, which arises through the selection of leaders with similar preferences and is rooted in the founders’ risk attitudes. Changes in corporate risk culture over time affect corporate investment policies, whereas cross-sectional differences in founders’ risk attitudes, that is, firms’ initial risk culture, contribute to differences across firms in persistent firm policies, such as research and development intensity.


Corresponding author

* Pan,, University of Utah David Eccles School of Business; Siegel (corresponding author),, University of Washington Foster School of Business; and Wang,, University of Minnesota Carlson School of Management.


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We thank an anonymous referee and Jennifer Conrad (the editor) for valuable suggestions and Anup Agrawal, Daniel Benjamin, Peter Bossaerts, Pierre Chaigneau, Bhagwan Chowdhry, Jeffrey Coles, Michael Cooper, Amy Dittmar, Ran Duchin, Mara Faccio, Mark Grinblatt, Charlie Hadlock, Campbell Harvey, Jean Helwege, David Hirshleifer, Han Kim, Samuli Knüpfer, Yun Liu, Ulrike Malmendier, Amiyatosh Purnanandam, Denis Sosyura, Nico Voigtländer, and seminar participants at the 2016 American Finance Association Annual Meeting, Chinese University of Hong Kong, the 2016 China International Conference in Finance Meeting, Cheung Kong Graduate School of Business, Drexel University, the 2015 European Finance Association Meeting, the 2016 Florida State University SunTrust Beach Conference, HEC (Montréal), Goethe University Frankfurt, Iowa State University, the 2015 Indian School of Business Summer Research Conference, Leibniz Universität Hannover, the 2014 National Bureau of Economic Research (NBER) Behavioral Finance Meeting, the 2015 NBER Culture and Economics Meeting, Tsinghua PBC School of Finance, University of California at Riverside, University of Hong Kong, University of Michigan, University of Minnesota, University of Utah, University of Washington, Vienna University of Economics and Business, and York University for helpful comments. We thank Vineet Bhagwat, Joey Engelberg, and Romain Wacziarg for sharing their data with us, and the behavioral research committee at the David Eccles School of Business, University of Utah, for providing research funding. We also thank Masood Ahmed, Aaron Burt, Luwam Gabreselassie, Rui Han, Seong Lee, and Yongjian Mu for excellent research assistance. Any errors or omissions are our own.



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