# Firm’s Risk-Return Association Facets and Prospect Theory Findings—An Emerging versus Developed Country Context

^{*}

## Abstract

**:**

## 1. Introduction

## 2. Literature Review and Hypotheses

#### 2.1. Literature Review

#### 2.2. Hypotheses

**Hypothesis**

**1 (H1).**

**Hypothesis**

**2 (H2).**

**Hypothesis**

**3 (H3).**

**Hypothesis**

**3.1 (H3.1).**

**Hypothesis**

**3.2 (H3.2).**

**Hypothesis**

**4 (H4).**

**Hypothesis**

**5 (H5).**

## 3. Data and Methodology

#### 3.1. Data

_{f,t}, ROE

_{f,t}and CR

_{f,t}are respective accounting returns of firm f at year t.

#### 3.2. Risk and Return Measurement

_{f,t}, is calculated as the firm’s return in the preceding year (henceforth FTR

_{1 year}(to investigate short-term impact)), and also firm’s mean return for preceding 5 years (henceforth FTR

_{5 years}(to investigate long-term impact)) on a rolling basis (see Table 2).

#### 3.3. Time, Industry-Classification, and Size, Age, Leverage and Liquidity Partitions’ Effects

#### 3.4. Test Design

_{f},

_{t}= ARROA

_{f,t}− ARROA

_{f,t−1}(1 year)

DTROA

_{f}

_{,t}= ARROA

_{f}

_{,t}− MeanROA

_{f}

_{,t−1...t−5}(5 years) (1.1)

DTCR

_{f}

_{,t}= ARCR

_{f}

_{,t}− ARCR

_{f}

_{,t−1}(1 year)

DTCR

_{f}

_{,t}= ARCR

_{f}

_{,t}− MeanCR

_{f}

_{,t−1...t−5}(5 years) (1.2)

_{f}

_{,t}and DTCR

_{f}

_{,t}= Distance from the target return level of the individual firm (i.e., FTR

_{f,t}) in year t.

_{f}

_{,t}and ARCR

_{f}

_{,t}= Actual return of ROA and CR respectively, for firm f in year t.

_{f}

_{,t−1}and ARCR

_{f}

_{,t−1}= Actual return of ROA and CR respectively, for firm f in year t − 1 (i.e., preceding year).

_{f}

_{, t−1...t−5}and MeanCR

_{f}

_{, t−1...t−5}= Mean return of ROA and CR respectively, for firm f in year t − 1 …. t − 5 (i.e., preceding 5 years) on a rolling basis.

#### 3.5. Multivariate Regression Model

_{f,t}= α + β

_{1}RETURN

_{f,t}+ β

_{2}DTSTFTR

_{f,t}+ β

_{3}DTLTFTR

_{f,t}+ β

_{4}DTSTITR

_{f,i,t}+ β

_{5}DTLTITR

_{f,i,t}+ β

_{6}SIZE

_{f,t}+ β

_{7}AGE

_{f,t}+ β

_{8}LEVERAGE

_{f,t}+ β

_{9}LIQUIDITY

_{f,t}+ β

_{10}RELATEDDIVERSIFICATION

_{f,t}+ β

_{11}UNRELATEDDIVERSIFICATION

_{f,t}+ β

_{12}FINANCIALFIRM

_{f,t}+ β

_{13}COUNTRY

_{f,t}+ ε

_{f,t}

_{f,t}= Risk measured by the standard deviation of the performance (return) measures for firm f at time t.

_{f,t}= Performance of the firm measured by ROA, ROE or CR in year t.

_{f,t}= Distance from the short-term (i.e., 1 year) target return level for the individual firm (f) in year t for ROA, ROE or CR.

_{f,t}= Distance from the long-term (i.e., 5 years) target return level for the individual firm (f) in year t for ROA, ROE or CR.

_{f,i,t}= Distance from the short-term (i.e., 1 year) target return level (i.e., cross-sectional industry mean return for preceding year) for the individual firm (f) in industry i in year t for ROA, ROE or CR.

_{f,i,t}= Distance from the long-term (i.e., 5 years) target return level (i.e., cross-sectional industry mean return for preceding 5 years on a rolling basis) for the individual firm (f) in industry i in year t for ROA, ROE or CR.

_{1}, β

_{2}, ..., β

_{13}= Coefficients; and ε

_{f,t}= Error term.

_{f,t}and DTLTFTR

_{f,t}(when this study is using a firm’s own past short- and long-term actual or mean return as the TR) and DTSTITR

_{f,i,t}and DTLTITR

_{f,i,t}(when this study is using cross-sectional industry short- and long-term mean return as the TR) would further strengthen its multivariate findings. If the slope coefficient, i.e., β

_{1}, β

_{2}, β

_{3}, β

_{4}, or β

_{5}, in individual cases, ends up being positive and significant, it should convey a conventional positive risk-return association for above-median firms mainly, whereas in case of below-median firms, negative and significant coefficient results would imply evidence of a Bowman’s (1980) “paradox”.9

## 4. Results and Discussions

#### 4.1. Descriptive Statistical Results

#### 4.2. Kendall’s Correlation Results

#### 4.2.1. Kendall’s Correlation Results—Overall Period

#### 4.2.2. Kendall’s Correlation Results—Bull and Bear Sub-Periods

#### 4.3. Multivariate Regression Results

#### 4.3.1. Multivariate Regression Results—Overall Period

_{1 year}and FTR

_{5 years}are influencing firm’s risk in most of the cases for manufacturing and service firms in the overall period across countries, for both superior and poor performers.

#### 4.3.2. Multivariate Regression Results—Bull and Bear Sub-Periods

_{1 year}and FTR

_{5 years}are influencing firm’s risk in most of the cases for manufacturing and service firms across countries in bull and bear sub-periods for both superior and poor performers (in line with the overall period results). Bull sub-periods results are in tandem with univariate results. In addition, most of bull and bear sub-periods partitions wise results across countries are in line with above discussed overall period results.12

#### 4.4. Robustness Checks Results

## 5. Conclusions

## Author Contributions

## Funding

## Conflicts of Interest

## Appendix A

**Table A1.**Descriptive statistic results. This table provides mean, maximum, minimum and standard deviation (SD) statistics for above- and below-median firms for the overall period and bull and bear sub-periods (in %). Additionally, we provide such results for industry-classified (i.e., manufacturing and service) firms.

A. Overall Period—All Firms | ||||||||||||

A1. Above-median firms | ||||||||||||

Overall | Developed | Emerging | ||||||||||

Variables | Min. | Max. | Mn. | SD | Min. | Max. | Mn. | SD | Min. | Max. | Mn. | SD |

ROA | 3.90 | 51.90 | 8.56 | 4.57 | 4.42 | 28.82 | 9.00 | 4.19 | 3.49 | 51.90 | 8.17 | 4.87 |

ROE | 11.19 | 328.58 | 20.16 | 14.20 | 12.06 | 328.58 | 21.88 | 17.26 | 10.26 | 158.34 | 18.69 | 10.95 |

CR | 6.80 | 2486.09 | 15.21 | 69.45 | 8.32 | 65.88 | 14.19 | 5.94 | 5.27 | 2486.09 | 15.75 | 93.55 |

A2. Below-median firms | ||||||||||||

ROA | −125.58 | 3.89 | 1.11 | 4.54 | −31.00 | 4.42 | 1.55 | 3.58 | −125.58 | 3.49 | 0.79 | 5.20 |

ROE | −547.27 | 11.18 | 3.20 | 17.49 | −81.83 | 12.04 | 5.74 | 7.36 | −547.27 | 10.25 | 1.21 | 22.44 |

CR | −187.76 | 6.80 | 1.89 | 7.08 | −23.96 | 8.32 | 4.34 | 3.41 | −187.76 | 5.25 | 0.21 | 8.77 |

B. Bull periods—all firms | ||||||||||||

B1. Above-median firms | ||||||||||||

ROA | 4.09 | 48.60 | 8.88 | 4.78 | 4.68 | 31.26 | 9.44 | 4.60 | 3.64 | 48.60 | 8.38 | 4.92 |

ROE | 11.61 | 260.58 | 21.19 | 13.27 | 12.63 | 260.58 | 23.23 | 15.87 | 10.69 | 165.30 | 19.44 | 10.47 |

CR | 7.08 | 1718.33 | 15.25 | 53.18 | 8.29 | 63.24 | 14.46 | 6.43 | 5.47 | 1718.33 | 15.64 | 71.47 |

B2. Below-median firms | ||||||||||||

ROA | −288.29 | 4.09 | 0.81 | 8.77 | −70.43 | 4.66 | 1.33 | 4.73 | −288.29 | 3.60 | 0.44 | 11.03 |

ROE | −101.92 | 11.61 | 3.31 | 9.96 | −83.69 | 12.62 | 5.32 | 9.15 | −101.92 | 10.68 | 1.75 | 10.38 |

CR | −244.31 | 7.08 | 1.66 | 9.00 | −37.50 | 8.29 | 4.18 | 4.22 | −244.31 | 5.46 | −0.14 | 11.27 |

C. Bear periods—All firms | ||||||||||||

C1. Above-median firms | ||||||||||||

ROA | 3.77 | 55.20 | 8.63 | 4.74 | 4.45 | 35.65 | 9.17 | 4.30 | 3.42 | 55.20 | 8.15 | 5.06 |

ROE | 10.94 | 423.78 | 20.28 | 16.65 | 12.08 | 423.78 | 22.03 | 20.36 | 9.91 | 190.46 | 18.76 | 12.76 |

CR | 6.75 | 4789.40 | 16.87 | 131.14 | 8.24 | 67.77 | 14.36 | 6.25 | 5.16 | 4789.40 | 18.63 | 176.68 |

C2. Below-median firms | ||||||||||||

ROA | −39.19 | 3.77 | 0.87 | 3.25 | −39.19 | 4.42 | 1.20 | 3.71 | −26.49 | 3.42 | 0.65 | 2.84 |

ROE | −1317.82 | 10.93 | 1.53 | 38.74 | −93.03 | 12.08 | 4.80 | 8.36 | −1317.82 | 9.87 | −1.04 | 51.58 |

CR | −74.67 | 6.75 | 1.77 | 4.96 | −22.46 | 8.21 | 4.16 | 3.48 | −74.67 | 5.15 | 0.12 | 5.51 |

D. Overall period—Manufacturing firms | ||||||||||||

D1. Above-median firms | ||||||||||||

ROA | 4.17 | 51.90 | 8.92 | 4.72 | 4.85 | 28.82 | 9.16 | 3.86 | 3.77 | 51.90 | 8.71 | 5.26 |

ROE | 10.60 | 158.34 | 19.74 | 11.67 | 11.70 | 109.87 | 20.74 | 10.96 | 9.72 | 158.34 | 18.98 | 12.15 |

CR | 7.14 | 2486.09 | 16.32 | 87.17 | 8.91 | 65.88 | 13.92 | 5.45 | 5.73 | 2486.09 | 17.61 | 113.13 |

D2. Below-median firms | ||||||||||||

ROA | −125.58 | 4.17 | 1.09 | 5.56 | −31.00 | 4.85 | 1.51 | 4.64 | −125.58 | 3.76 | 0.84 | 6.13 |

ROE | −547.27 | 10.60 | 1.88 | 21.32 | −81.83 | 11.69 | 4.34 | 8.94 | −547.27 | 9.72 | 0.27 | 26.59 |

CR | −23.96 | 7.13 | 2.70 | 3.76 | −23.96 | 8.90 | 5.30 | 3.81 | −16.07 | 5.69 | 1.26 | 3.22 |

E. Overall period—Service firms | ||||||||||||

E1. Above-median firms | ||||||||||||

ROA | 3.33 | 28.33 | 7.90 | 4.28 | 3.87 | 28.33 | 8.73 | 4.63 | 2.93 | 22.68 | 6.94 | 3.70 |

ROE | 11.87 | 328.58 | 20.80 | 17.70 | 12.40 | 328.58 | 23.34 | 23.04 | 11.10 | 91.73 | 17.95 | 7.86 |

CR | 5.83 | 125.84 | 13.24 | 8.86 | 7.38 | 47.34 | 14.44 | 6.63 | 4.28 | 125.84 | 11.67 | 10.80 |

E2. Below-median firms | ||||||||||||

ROA | −13.10 | 3.33 | 1.17 | 1.82 | −5.41 | 3.86 | 1.64 | 1.23 | −13.10 | 2.91 | 0.71 | 2.25 |

ROE | −46.21 | 11.84 | 5.48 | 6.75 | −8.81 | 12.35 | 7.59 | 3.82 | −46.21 | 11.05 | 3.23 | 8.40 |

CR | −187.76 | 5.82 | 0.59 | 10.47 | −5.26 | 7.36 | 3.15 | 2.43 | −187.76 | 4.25 | −1.95 | 14.58 |

**Table A2.**Descriptive statistic results. This table provides mean, maximum, minimum and standard deviation (SD) statistics for partition-firms (overall) for the overall period and also for developed and emerging markets (in %).

1A. Size partitions | ||||||||

Variables | Small | Large | ||||||

Min. | Max. | Mn. | SD | Min. | Max. | Mn. | SD | |

ROA | −125.58 | 51.90 | 4.83 | 6.83 | −13.10 | 41.57 | 4.84 | 4.77 |

ROE | −127.36 | 328.58 | 10.79 | 17.05 | −547.27 | 109.87 | 12.57 | 18.95 |

CR | −23.96 | 2486.09 | 10.03 | 69.77 | −187.76 | 65.88 | 7.07 | 9.44 |

1B. Age partitions | ||||||||

Young | Old | |||||||

ROA | −125.58 | 28.33 | 4.13 | 6.33 | −16.41 | 51.90 | 5.53 | 5.32 |

ROE | −547.27 | 328.58 | 9.73 | 21.92 | −127.36 | 158.34 | 13.63 | 12.78 |

CR | −187.76 | 509.94 | 6.82 | 17.10 | −45.02 | 2486.09 | 10.28 | 68.29 |

1C. Leverage partitions | ||||||||

Low leverage | High leverage | |||||||

ROA | −125.58 | 41.57 | 5.86 | 7.19 | −13.03 | 51.90 | 3.81 | 3.95 |

ROE | −127.36 | 128.68 | 12.92 | 12.83 | −547.27 | 328.58 | 10.44 | 21.99 |

CR | −187.76 | 125.84 | 8.65 | 10.40 | −80.18 | 2486.09 | 8.46 | 69.67 |

1D. Liquidity partitions | ||||||||

Low liquidity | High liquidity | |||||||

ROA | −125.58 | 51.90 | 4.77 | 6.78 | −13.10 | 41.57 | 4.90 | 4.84 |

ROE | −127.36 | 328.58 | 10.93 | 17.35 | −547.27 | 109.87 | 12.42 | 18.68 |

CR | −23.96 | 2486.09 | 9.99 | 69.68 | −187.76 | 125.84 | 7.12 | 10.10 |

2A. Size partitions (developed) | ||||||||

Variables | Small | Large | ||||||

Min. | Max. | Mn. | SD | Min. | Max. | Mn. | SD | |

ROA | −31.00 | 28.82 | 6.41 | 6.42 | −4.56 | 23.58 | 4.13 | 3.80 |

ROE | −81.83 | 328.58 | 15.20 | 19.39 | −13.48 | 109.87 | 12.41 | 10.14 |

CR | −23.96 | 47.34 | 11.13 | 7.39 | −4.96 | 65.88 | 7.40 | 5.83 |

2B. Age partitions (developed) | ||||||||

Young | Old | |||||||

ROA | −31.00 | 28.33 | 5.67 | 6.30 | −11.40 | 28.82 | 4.87 | 4.27 |

ROE | −81.83 | 328.58 | 14.73 | 19.47 | −28.09 | 101.63 | 12.87 | 10.09 |

CR | −23.96 | 42.16 | 10.20 | 7.51 | −5.26 | 65.88 | 8.33 | 6.11 |

2C. Leverage partitions (developed) | ||||||||

Low leverage | High leverage | |||||||

ROA | −31.00 | 28.82 | 6.15 | 6.35 | −30.07 | 24.28 | 4.40 | 4.04 |

ROE | −38.16 | 109.87 | 13.84 | 11.55 | −81.83 | 328.58 | 13.77 | 18.68 |

CR | −23.96 | 65.88 | 10.21 | 7.97 | −17.17 | 37.10 | 8.32 | 5.49 |

2D. Liquidity partitions (developed) | ||||||||

Low liquidity | High liquidity | |||||||

ROA | −31.00 | 28.82 | 6.08 | 6.29 | −4.56 | 23.58 | 4.46 | 4.16 |

ROE | −81.83 | 328.58 | 14.87 | 19.20 | −13.48 | 109.87 | 12.73 | 10.57 |

CR | −23.96 | 47.34 | 10.76 | 7.24 | −4.96 | 65.88 | 7.77 | 6.21 |

3A. Size partitions (emerging) | ||||||||

Small | Large | |||||||

ROA | −125.58 | 51.90 | 3.47 | 6.82 | −13.10 | 41.57 | 5.48 | 5.43 |

ROE | −127.36 | 158.34 | 7.19 | 13.81 | −547.27 | 96.95 | 12.69 | 23.88 |

CR | −16.07 | 2486.09 | 9.23 | 93.87 | −187.76 | 52.02 | 6.72 | 11.60 |

3B. Age partitions (emerging) | ||||||||

Young | Old | |||||||

ROA | −125.58 | 26.97 | 3.33 | 6.43 | −13.10 | 51.90 | 5.62 | 5.83 |

ROE | −547.27 | 128.68 | 6.92 | 23.53 | −127.36 | 158.34 | 12.96 | 14.31 |

CR | −16.07 | 125.84 | 5.09 | 8.01 | −187.76 | 2486.09 | 10.86 | 94.11 |

3C. Leverage partitions (emerging) | ||||||||

Low leverage | High leverage | |||||||

ROA | −125.58 | 41.57 | 5.49 | 7.62 | −13.03 | 51.90 | 3.46 | 4.24 |

ROE | −127.36 | 128.68 | 11.91 | 13.08 | −547.27 | 158.34 | 7.98 | 24.44 |

CR | −187.76 | 509.94 | 7.81 | 22.01 | −80.18 | 2486.09 | 8.13 | 91.94 |

3D. Liquidity partitions (emerging) | ||||||||

Low liquidity | High liquidity | |||||||

ROA | −125.58 | 51.90 | 3.72 | 6.98 | −13.10 | 41.57 | 5.23 | 5.31 |

ROE | −127.36 | 158.34 | 7.83 | 14.90 | −547.27 | 96.95 | 12.05 | 23.35 |

CR | −21.71 | 2486.09 | 9.50 | 93.76 | −187.76 | 125.84 | 6.44 | 12.40 |

## Appendix B

_{f,i,t}, is calculated as the cross-sectional industry mean return for preceding 1 year (henceforth ITR

_{f,i,}

_{1 year}(simply ITR

_{1 year})), and also cross-sectional industry mean return for the preceding 5 years (henceforth ITR

_{f,i,}

_{5 years}(simply ITR

_{5 years})) on a rolling basis, i.e.,

_{1 year}= Mean-return

_{i}

_{,t−1}

_{5 years}= Mean-return

_{i}

_{,t−1, ..., t−5}

_{f},

_{i,t}= ARROA

_{f,i,t}− MeanROA

_{i,t−1}(1 year)

DTROA

_{f},

_{i}

_{,t}= ARROA

_{f}

_{,i,t}− MeanROA

_{i}

_{,t−1...t−5}(5 years)

_{f},

_{i,t}= ARCR

_{f,i,t}− MeanCR

_{i,t−1}(1 year)

DTCR

_{f}

_{,i,t}= ARCR

_{f}

_{,i,t}− MeanCR

_{i}

_{,t−1...t−5}(5 years)

_{f,i}

_{,t}and DTCR

_{f}

_{,i,t}= Distance from the target return level of the cross-sectional industry mean return (i.e., ITR

_{f,i,t}) in year t.

_{f}

_{,i,t}and ARCR

_{f}

_{,i,t}= Actual return of ROA and CR respectively, for firm f in industry i in year t.

_{i}

_{,t−1}and MeanCR

_{i}

_{,t−1}= Cross-sectional industry mean return of ROA and CR respectively, for industry i in year t−1 (i.e., preceding year) on a rolling basis.

_{i}

_{,t−1...t−5}and MeanCR

_{i}

_{,t−1...t−5}= Cross-sectional industry mean return of ROA and CR respectively, for industry i in year t−1…t−5 (i.e., preceding 5 years) on a rolling basis.

_{f,t}= Size of the firm measured by book value of assets (average) of firm f in year t.

_{f,t}= Age of firm at the point of analysis.

_{f,t}= Risk measured by debt-equity ratio of firm f in year t.

_{f,t}= Liquidity (i.e., cash holdings) of the firm measured by cash and cash equivalents (average) of firm f in year t.

_{f,t}= Related diversified firm (=1) and others (=0) (dummy 1)

_{f,t}= Unrelated diversified firm (=1) and others (=0) (dummy 2)

_{f,t}= Financial firm (=1) and others (=0) (dummy 3).

## References

- Aaker, David A., and Robert Jacobson. 1987. The role of risk in explaining differences in profitability. Academy of Management Journal 30: 277–96. [Google Scholar]
- Abdullah, Mokhtar Bin. 1990. On a robust correlation coefficient. The Statistician 39: 455–60. [Google Scholar] [CrossRef]
- Acharya, Viral V., Heitor Almeida, and Murillo Campello. 2007. Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies. Journal of Financial Intermediation 16: 515–54. [Google Scholar] [CrossRef]
- Albrecht, W. Steve, Conan C. Albrecht, and Chad O. Albrecht. 2004. Fraud and corporate executives: Agency, stewardship and broken trust. Journal of Forensic Accounting 5: 109–30. [Google Scholar]
- Arellano, Manuel, and Olympia Bover. 1995. Another look at the instrumental variable estimation of error-components models. Journal of Econometrics 68: 29–51. [Google Scholar] [CrossRef]
- Armour, Henry Ogden, and David J. Teece. 1978. Organizational structure and economic performance: A test of the multidivisional hypothesis. The Bell Journal of Economics 9: 106–22. [Google Scholar] [CrossRef]
- Bae, Sung C., Kiyoung Chang, and Eun Kang. 2012. Culture, corporate governance, and dividend policy: International evidence. Journal of Financial Research 35: 289–316. [Google Scholar] [CrossRef]
- Balakrishna, N., and Chin Diew Lai. 2009. Bivariate distributions constructed by the conditional Approach. In Continuous Bivariate Distributions. New York: Springer, pp. 229–78. [Google Scholar]
- Baskin, Jonathan. 1987. Corporate liquidity in games of monopoly power. The Review of Economics and Statistics 69: 312–19. [Google Scholar] [CrossRef]
- Baucus, David A., Joseph H. Golec, and Juett R. Cooper. 1993. Estimating risk-return relationships: An analysis of measures. Strategic Management Journal 14: 387–96. [Google Scholar] [CrossRef]
- Becerra, Manuel, and Garren Markarian. 2013. The Bowman Paradox and Industry Competition: Dynamics of the Risk-Performance Relationship. Paper presented at XXXVIII Jornadas de Economia Industrial, Madrid, Spain, May 23; pp. 1–40. [Google Scholar]
- Bettis, Richard A. 1981. Performance differences in related and unrelated diversified firms. Strategic Management Journal 2: 379–93. [Google Scholar] [CrossRef]
- Bettis, Richard A., and Vijay Mahajan. 1985. Risk/return performance of diversified firms. Management Science 31: 785–99. [Google Scholar] [CrossRef]
- Bettis, Richard A., and William K. Hall. 1982. Diversification strategy, accounting determined risk and accounting determined return. Academy of Management Journal 25: 254–64. [Google Scholar]
- Bigus, Jochen. 2015. Loss aversion, audit risk judgments, and auditor liability. European Accounting Review 24: 581–606. [Google Scholar] [CrossRef]
- Black, Fisher. 1976. Studies of Stock Price Volatility Changes. Washington, DC: American Statistical Association, pp. 177–81. [Google Scholar]
- Blundell, Richard, and Stephen Bond. 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics 87: 115–43. [Google Scholar] [CrossRef]
- Bowman, Edward H. 1980. A risk/return paradox for strategic management. Sloan Management Review 21: 17–31. [Google Scholar]
- Bowman, Edward H. 1982. Risk seeking by troubled firms. Sloan Management Review 23: 33–42. [Google Scholar]
- Bowman, Edward H. 1984. Content analysis of annual reports for corporate strategy and risk. Interfaces 14: 61–71. [Google Scholar] [CrossRef]
- Brealey, Richard A., Stewart C. Myers, and Franklin Allen. 2017. Principles of Corporate Finance, 12th ed. New York: McGraw-Hill. [Google Scholar]
- Brick, Ivan E., Oded Palmon, and Itzhak Venezia. 2015. On the Relationship between Accounting Risk and Return: Is There a (Bowman) Paradox? European Management Review 12: 99–111. [Google Scholar] [CrossRef]
- Bromiley, Philip. 1991. Testing a Causal Model of Corporate Risk Taking and Performance. Academy of Management Journal 34: 37–59. [Google Scholar] [Green Version]
- Bruinshoofd, Allard, and Leo De Haan. 2005. Financing the New Economy: Are ICT Firms Really that Different? Amsterdam: De Nederlandsche Bank. [Google Scholar]
- Buvanendra, Shantharuby, P. Sridharan, and S. Thiyagarajan. 2017. Firm characteristics, corporate governance and capital structure adjustments: A comparative study of listed firms in Sri Lanka and India. IIMB Management Review 29: 245–58. [Google Scholar] [CrossRef]
- Chang, Yegmin, and Howard Thomas. 1989. The impact of diversification strategy on risk-return performance. Strategic Management Journal 10: 271–84. [Google Scholar] [CrossRef]
- Chen, Peter Y., and Paula M. Popovich. 2002. Correlation: Parametric and Nonparametric Measures. Thousand Oaks: Sage Publications Inc. [Google Scholar]
- Chou, Pin -Huang, Robin K. Chou, and Kuan -Cheng Ko. 2009. Prospect theory and the risk-return paradox: Some recent evidence. Review of Quantitative Finance and Accounting 33: 193–208. [Google Scholar] [CrossRef]
- Christie, Andrew A. 1982. The stochastic behavior of common stock variances: Value, leverage and interest rate effects. Journal of Financial Economics 10: 407–32. [Google Scholar] [CrossRef]
- Cool, Karel, Ingemar Dierickx, and David Jemison. 1989. Business strategy, market structure and risk-return relationships: A structural approach. Strategic Management Journal 10: 507–22. [Google Scholar] [CrossRef]
- Cyert, Richard M., and James G. March. 1992. A Behavioral Theory of the Firm. Englewood Cliffs: Prentice-Hall. [Google Scholar]
- Dang, Chongyu, Zhichuan Frank Li, and Chen Yang. 2018. Measuring firm size in empirical corporate finance. Journal of Banking & Finance 86: 159–76. [Google Scholar]
- DasGupta, Ranjan. 2017. Risk-Attitudes of the NSE 500 Firms—Bowman’s Paradox and Prospect Theory Perspectives. IIMB Management Review 29: 76–89. [Google Scholar] [CrossRef]
- Deephouse, David L., and Robert M. Wiseman. 2000. Comparing alternative explanations for accounting risk-return relations. Journal of Economic Behaviorand Organization 42: 463–82. [Google Scholar] [CrossRef]
- Denis, David J. 2011. Financial flexibility and corporate liquidity. Journal of Corporate Finance 17: 667–74. [Google Scholar] [CrossRef]
- Díez-Estebana, Jose Maria, Conrado Diego García-Gómezb, Felix Javier López-Iturriagac, and Marcos Santamaría-Mariscal. 2017. Corporate risk-taking, returns and the nature of major shareholders: Evidence from prospect theory. Research in International Business and Finance 42: 900–11. [Google Scholar] [CrossRef]
- Ferreira, Miguel A., and Antonio S. Vilela. 2004. Why do firms hold cash? Evidence from EMU countries. European Financial Management 10: 295–319. [Google Scholar] [CrossRef]
- Fiegenbaum, Avi. 1990. Prospect Theory and the Risk-Return Association: An Empirical Examination of 85 Industries. Journal of Economic Behavior and Organization 14: 187–203. [Google Scholar] [CrossRef]
- Fiegenbaum, Avi, and Howard Thomas. 1988. Attitudes toward risk and the risk-return paradox prospect theory explanations. Academy of Management Journal 73: 337–63. [Google Scholar]
- Fiegenbaum, Avi, and Howard Thomas. 2004. Strategic risk and competitive advantage: An integrative perspective. European Management Review 1: 84–95. [Google Scholar] [CrossRef]
- Fishburn, Peter C. 1977. Mean-Risk Analysis with Risk Associated with Below-Target Returns. American Economic Review 67: 116–26. [Google Scholar]
- Fisher, Irving N., and George R. Hall. 1969. Risk and corporate rates of return. The Quarterly Journal of Economics 83: 79–92. [Google Scholar] [CrossRef]
- Frecka, Thomas J., and Cheng F. Lee. 1983. Generalized Financial Ratio Adjustment Processes and Their Implications. Journal of Accounting Research 21: 308–16. [Google Scholar] [CrossRef]
- Gaud, Philippe, Elion Jani, Martin E. R. Hoesli, and Andre Bender. 2005. The capital structure of Swiss companies: An empirical analysis using dynamic panel data. European Financial Management 11: 51–69. [Google Scholar] [CrossRef]
- Greene, William H. 2008. The econometric approach to efficiency analysis. The Measurement of Productive Efficiency and Productivity Growth 1: 92–250. [Google Scholar]
- Harford, Jarrad, Wayne Mikkelson, and M. Megan Partch. 2003. The Effect of Cash Reserves on Corporate Investment and Performance in Industry Downturns. Unpublished working paper. [Google Scholar]
- Haushalter, David, Sandy Klasa, and William F. Maxwell. 2007. The influence of product market dynamics on a firm’s cash holdings and hedging behavior. Journal of Financial Economics 84: 797–825. [Google Scholar] [CrossRef]
- Heggestad, Arnold A. 1977. Market structure, risk and profitability in commercial banking. The Journal of Finance 32: 1207–16. [Google Scholar] [CrossRef]
- Henkel, Joachim. 2000. The risk-return fallacy. Schmalenbach Business Review: ZFBF 52: 363. [Google Scholar] [CrossRef]
- Hofstede, Geert. 2001. Culture Consequences: Comparing Values, Behaviors, Institutions and Organizations across Nations. London: SAGE. [Google Scholar]
- Holder, Anthony Dewayne, Alexey Petkevich, and Gary Moore. 2016. Does managerial myopia explain Bowman’s Paradox? American Journal of Business 31: 102–22. [Google Scholar] [CrossRef]
- Horowitz, Joel L., Tim Loughran, and Nathan E. Savin. 2000. Three analyses of the firm size premium. Journal of Empirical Finance 7: 143–53. [Google Scholar] [CrossRef]
- Jemison, David B. 1987. Risk and the relationship among strategy, organizational processes, and performance. Management Science 33: 1087–101. [Google Scholar] [CrossRef]
- John, Teresa A. 1993. Accounting measures of corporate liquidity, leverage, and costs of financial distress. Financial Management 22: 91–100. [Google Scholar] [CrossRef]
- Kahneman, Daniel, and Amos Tversky. 1979. Prospect theory: An analysis of decision under risk. Econometrica 47: 263–91. [Google Scholar] [CrossRef]
- Kendall, Maurice. 1938. A New Measure of Rank Correlation. Biometrika 30: 81–89. [Google Scholar] [CrossRef]
- Kliger, Doron, and Iris Tsur. 2011. Prospect Theory and Risk-Seeking Behavior by Troubled Firms. Journal of Behavioral Finance 12: 29–40. [Google Scholar] [CrossRef]
- Knez, Peter J., and Mark J. Ready. 1997. On the robustness of size and book-to-market in cross-sectional regressions. The Journal of Finance 52: 1355–82. [Google Scholar] [CrossRef]
- Lee, Don Y. 1997. The Impact of Poor Performance on Risk-Taking Attitudes: A Longitudinal Study with a PLS Causal Modeling Approach. Decision Sciences 28: 59–80. [Google Scholar] [CrossRef]
- Lehner, Johannes M. 2000. Shifts of Reference Points for Framing of Strategic Decisions and Changing Risk-Return Associations. Management Science 46: 63–76. [Google Scholar] [CrossRef]
- Lev, Baruch. 1969. Industry Averages as Targets for Financial Ratios. Journal of Accounting Research 7: 290–99. [Google Scholar] [CrossRef]
- Li, Kai, Dale Griffin, Heng Yue, and Longkai Zhao. 2013. How does culture influence corporate risk-taking? Journal of Corporate Finance 23: 1–22. [Google Scholar] [CrossRef] [Green Version]
- Liebetrau, Albert M. 1976. Measures of Association. Beverly Hills and London: Sage Publications Inc. [Google Scholar]
- Miller, Kent D., and Michael J. Leiblein. 1996. Corporate risk-return relations: Returns variability versus downside risk. The Academy of Management Journal 39: 91–122. [Google Scholar]
- Miller, Kent D., and Philip Bromiley. 1991. Strategic risk and corporate performance: An analysis of alternative risk measures. Academy of Management Journal 33: 756–79. [Google Scholar]
- Miller, Kent D., and Wei-Ru Chen. 2003. Risk and firms’ costs. Strategic Organization 1: 355–82. [Google Scholar] [CrossRef]
- Myers, Stewart C. 1984. The capital structure puzzle. The Journal of Finance 39: 574–92. [Google Scholar] [CrossRef]
- Nenu, Elena Alexandra, Georgeta Vintilă, and Stefan Cristian Gherghina. 2018. The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies. International Journal of Financial Studies 6: 41. [Google Scholar] [CrossRef]
- Opler, Tim, Lee Pinkowitz, Rene Stulz, and Rohan Williamson. 1999. The determinants and implications of corporate cash holdings. Journal of Financial Economics 52: 3–46. [Google Scholar] [CrossRef] [Green Version]
- Oviatt, Benjamin M., and Alan D. Bauerschmidt. 1991. Business Risk and Return: A Test of Simultaneous Relationships. Management Science 37: 1405–23. [Google Scholar] [CrossRef]
- Ozkan, Aydin, and Neslihan Ozkan. 2004. Corporate cash holdings: An empirical investigation of UK companies. Journal of Banking & Finance 28: 2103–34. [Google Scholar]
- Pearson, Karl. 1895. Contributions to the mathematical theory of evolution. II. Skew variation in homogeneous material. Philosophical Transactions of the Royal Society of London 186: 343–424. [Google Scholar] [CrossRef]
- Perlitz, Manfred, and Helge Löbler. 1985. Brauchen Unternehmenzum Innovieren Krisen. Zeitschrift für Betriebswirtschaft 55: 424–50. [Google Scholar]
- Petrou, Andreas P., and Andreas Procopiou. 2016. CEO shareholdings and earnings manipulation: A behavioral explanation. European Management Review 13: 137–48. [Google Scholar] [CrossRef]
- Ramirez, Andres, and Solomon Tadesse. 2009. Corporate cash holdings, uncertainty avoidance, and the multinationality of firms. International Business Review 18: 387–403. [Google Scholar] [CrossRef]
- Roodman, David. 2009. How to do xtabond2: An introduction to difference and system GMM in Stata. Stata Journal 9: 86–136. [Google Scholar] [CrossRef]
- Ross, Stephen A. 1973. The economic theory of agency: The principal’s problem. American Economic Review 63: 134–39. [Google Scholar]
- Ruefli, Timothy W., James M. Collins, and Joseph R. Lacugna. 1999. Risk measures in strategic management research: Auld Lang Syne. Strategic Management Journal 20: 167–94. [Google Scholar] [CrossRef]
- Schoemaker, Paul J. H. 1982. The expected utility model: Its variants, purpose, evidence, and limitations. Journal of Economic Literature 20: 529–63. [Google Scholar]
- Spearman, Charles. 1904. The proof and measurement of association between two things. The American Journal of Psychology 15: 72–101. [Google Scholar] [CrossRef]
- Subramaniam, Venkat, Tony T. Tang, Heng Yue, and Xin Zhou. 2011. Firm structure and corporate cash holdings. Journal of Corporate Finance 17: 759–73. [Google Scholar] [CrossRef]
- Tversky, Amos, and Daniel Kahneman. 1992. Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty 5: 297–323. [Google Scholar] [CrossRef] [Green Version]
- Von Neumann, John, and Oskar Morgenstern. 1944. Theory of Games and Economic Behavior. Princeton: Princeton University Press. [Google Scholar]
- Wafa, Khemiri, and Noubbigh Hédi. 2018. Determinants of capital structure: Evidence from sub-Saharan African firms. The Quarterly Review of Economics and Finance. [Google Scholar] [CrossRef]
- Wiemann, Volker, and Thomas Mellewigt. 1998. Das Risiko-Rendite Paradoxon. Stand der Forschung und Ergebnisse einer empirischen Untersuchung. Schmalenbachs Zeitschrift für Betriebswirtschaftliche Forschung 50: 551–72. [Google Scholar] [CrossRef]
- Wiseman, Robert, and Philip Bromiley. 1991. Risk-Return Associations: Paradox or Artifact? An Empirical Tested Explanation. Strategic Management Journal 12: 231–41. [Google Scholar] [CrossRef]
- Woo, Carolyn Y. 1987. Path analysis of the relationship between market share, business-level conduct and risk. Strategic Management Journal 8: 149–68. [Google Scholar] [CrossRef]

1 | This study will be unique in its approach as it will consider both above- and below-median firms to investigate their risk-averse (conventional) and risk-seeking (paradoxical) behavior in accordance with the PT implications unlike many previous studies focusing only on “Bowman’s paradox” and subsequent PT evidence. |

2 | The correlation between average return measure and the standard deviation of that in the subsequent period is significant and negative. Similarly, this study uses the standard deviation of return measures for past period(s) as a proxy for risk influencing future period returns. |

3 | This basic proposition helps us to formulate our two main hypotheses as presented in Data and Methodology section. |

4 | We do this by formulating two additional main hypotheses as presented in the Data and Methodology section. These are major and first-time contributions of this study. |

5 | Based on the documented literature, we also formulate two additional sub-hypotheses (under the third main hypothesis for diversified firms) as presented in Data and Methodology section. These are also major and first-time contributions of this study. |

6 | This is in contradiction with earlier cash holdings/liquidity for large firms (see Subramaniam et al. 2011) (representing firm-size here) which this study uses as a symbol of “market power”, but in line with the pecking order theory (Myers 1984) and the free cash flow hypothesis (Ferreira and Vilela 2004). |

7 | These results have pointed out the linear nature of datasets with minimum number of outliers. This motivates this study to apply Kendall’s (1938) correlation test initially and multivariate regression model for further analysis. In addition, we conduct outlier-trimming robustness check tests here for making these results more authentic. |

8 | In the first robustness test of all firms excluding financial firms, the financial firm dummy is not incorporated. Similarly, in the investigation of related and unrelated diversified firms’ cases, the respective dummy variable is also not incorporated. |

9 | This study is trying to figure out the risk level assumed by the firm to generate that return under a certain given reported return performance. Hence, it uses risk as the dependent and target returns as the independent variables in the model. |

10 | Bull and bear sub-periods results for the industry-classified and partitions wise sub-samples are also calculated and discussed in this sub-section, but we do not show relevant tables here for brevity. |

11 | Multivariate regression results of diversified (related and unrelated) and industry-classified firms are discussed in this sub-section, but relevant tables are not shown here for brevity purpose. We discuss such results for partitions sub-samples here but do not show for brevity purpose. |

12 | We discuss multivariate regression results of all firms and emerging and developed countries firms in bull and bear sub-periods in this sub-section, but we do not show relevant tables here for brevity. |

13 | Robustness tests (except ROE) results are not shown here for brevity. |

**Table 1.**Demographic data. This table provides number of companies of each country studied under this work. In total, we study 2666 firms (1199 firms from 15 developed countries and 1467 firms from 12 emerging countries) here.

Countries (Developed) | Number of Firms |
---|---|

AUSTRALIA | 130 |

BELGIUM | 13 |

CANADA | 154 |

FRANCE | 37 |

GERMANY | 29 |

HONG KONG | 35 |

JAPAN | 169 |

KOREA | 90 |

NEWZELAND | 22 |

SINGAPORE | 22 |

SPAIN | 19 |

SWITZERLAND | 17 |

UK | 71 |

USA | 371 |

NETHARLANDS | 20 |

AREGENTINA | 19 |

BRAZIL | 31 |

MEXICO | 23 |

CHINA | 718 |

INDIA | 261 |

INDONESIA | 215 |

MALAYASIA | 21 |

PAKISTAN | 66 |

PHILIPPINES | 23 |

TAIWAN | 34 |

THAILAND | 27 |

CHILI | 29 |

SRI LANKA | 03 |

VIETNAM | 01 |

**Table 2.**Description of variables. This table depicts the variables (dependent, independent, control and dummy) undertaken in this study. Here, return on asset (ROA), cash ration (CR) and return on equity (ROE) are the main independent variables and standrad deviations (SD) of them are the dependent variables in the regression model. In addition, firm’s target returns (FTR) and industry-adjusted target returns (ITR) for the short-term (1 year) and long term (5 years) are influencing firm-risk. We take size, age, leverage and liquidity as control variables and related diversified, unrelated diversified, financial firms and country as dummy variables.

ROA (Return on Assets) | Net income/Book value of assets (average) [(beginning + ending)/2] |

CR (Cash Ratio) | Operating cash flow/Book value of assets (average) [(beginning + ending)/2] |

ROE (Return on Equity) | Net income/Book value of shareholders’ equity (average) [(beginning + ending)/2] |

FTR_{t} | Firm’s target return level in the tth year (FTR_{1 year}) or for preceding t years (FTR_{5 years}) |

FTR_{1 year}= Actual Return_{f, t}_{−1}; FTR_{5 years}= Mean-return_{f}_{, t−1...t−5} | |

ITR_{t} | See Appendix A |

Standard deviation (σ) | Represents risk and calculated as: |

$\sigma {(AR)}_{t}=\sqrt{{\displaystyle \sum _{j=t-5}^{t-1}\frac{{(A{R}_{j}-\overline{AR})}^{2}}{n-1}}}$ | |

where, t = 2004, 2005, …, 2015 | |

AR = ROA, ROE and CR | |

Size | Average total assets [(beginning + ending)/2] in year t |

Age | Present year—Year of incorporation |

Leverage | Average [(beginning + ending)/2] of (Total debt/Total assets) in year t |

Liquidity | Average [(beginning + ending)/2] of cash & cash equivalents in year t |

Related Diversification | Diversified firms in the same or related industry, 1 if so otherwise 0 |

Unrelated Diversification | Diversified firms in different industries, 1 if so otherwise 0 |

Financial | Firms from banking, Non-banking financial companies (NBFCs) and other finance-related industries (brokerages, etc.) regulated by authorities, 1 if so otherwise 0 |

Country | Emerging (0) and developed (1) |

**Table 3.**Kendall’s correlation results. This table provides Kendall’s τ correlation results for the overall sample of 2666 firms (1199 firms from 15 developed countries and 1467 firms from 12 emerging countries) after dividing them in above- and below-median firms based on cross-sectional median values. Here, ROA stands for return on assets, ROE represents return on equity and CR denotes cash ratio. FTR stands for firm-adjusted target return and ITR implies industry-adjusted target return. We calculate for 1-year and 5-year time periods on a rolling basis.

Overall | Developed | Emerging | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|

Above-median firms | ||||||||||||

Variables | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} |

ROA | 0.007 | 0.078 *** | −0.001 | 0.052 *** | −0.016 | 0.062 ** | 0.105 *** | 0.153 *** | 0.005 | 0.081 *** | 0.068 *** | 0.125 *** |

ROE | −0.097 *** | 0.074 *** | −0.046 ** | 0.015 | −0.080 *** | 0.093 *** | −0.072 *** | 0.004 | −0.120 *** | 0.044 * | −0.046 * | 0.005 |

CR | −0.012 | 0.029 | −0.004 | 0.015 | 0.005 | 0.023 | −0.032 | −0.038 | −0.013 | 0.024 | −0.026 | −0.018 |

Below-median firms | ||||||||||||

ROA | −0.053 *** | −0.044 ** | 0.185 *** | 0.182 *** | 0.013 | 0.045 * | 0.167 *** | 0.184 *** | −0.049 ** | −0.058 ** | 0.176 *** | 0.169 *** |

ROE | 0.025 | 0.028 | −0.074 *** | −0.026 | 0.021 | 0.108 *** | −0.081 *** | −0.008 | 0.040 | −0.023 | −0.048 * | −0.032 |

CR | −0.020 | −0.084 *** | 0.036 ** | 0.017 | −0.003 | −0.039 | −0.054 ** | −0.059 ** | 0.016 | −0.050 ** | −0.055 ** | −0.056 ** |

**Table 4.**Kendall’s correlation results. This table provides Kendall’s τ correlation results for 1645 manufacturing (old-economy) (722 firms from 15 developed countries and 923 firms from 12 emerging countries) and 1021 service (new-economy) (477 firms from 15 developed countries and 544 firms from 12 emerging countries) firms after dividing them in above- and below-median firms based on cross-sectional median values. This also includes similar results for 101 diversified (56 related and 45 unrelated) firms across 27 countries. We calculate for 1-year and 5-year time periods on a rolling basis.

Overall | Developed | Emerging | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|

A. Manufacturing | ||||||||||||

Above-median firms | ||||||||||||

Variables | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} |

ROA | −0.031 | 0.040 * | −0.027 | 0.030 | −0.028 | 0.032 | 0.094 *** | 0.150 *** | −0.011 | 0.074 ** | 0.089 *** | 0.157 *** |

ROE | −0.141 *** | 0.052 ** | −0.050 ** | 0.016 | −0.110 *** | 0.073 ** | −0.105 *** | −0.021 | −0.157 *** | 0.052 * | −0.014 | 0.031 |

CR | 0.006 | 0.059 ** | 0.019 | 0.051 ** | 0.025 | 0.069 * | −0.025 | −0.028 | −0.043 | −0.002 | 0.000 | 0.007 |

Below-median firms | ||||||||||||

ROA | −0.010 | 0.006 | −0.063 *** | −0.015 | 0.028 | 0.024 | 0.081 ** | 0.096 *** | 0.018 | 0.043 | 0.027 | 0.028 |

ROE | 0.041 * | 0.025 | −0.103 *** | −0.041 | 0.015 | 0.074 ** | −0.077 ** | −0.001 | 0.060 ** | −0.006 | −0.038 | −0.015 |

CR | −0.014 | −0.062 *** | −0.023 | −0.036 | 0.045 | 0.024 | −0.078 ** | −0.086 ** | 0.015 | −0.017 | −0.097 *** | −0.103 *** |

B. Service | ||||||||||||

Above-median firms | ||||||||||||

ROA | 0.023 | 0.102 *** | 0.052 * | 0.091 *** | 0.038 | 0.126 *** | 0.114 *** | 0.154 *** | 0.033 | 0.094 ** | 0.052 | 0.091 ** |

ROE | −0.036 | 0.102 *** | 0.015 | 0.062 ** | −0.036 | 0.110 ** | −0.023 | 0.018 | −0.076 * | 0.008 | −0.120 *** | −0.070 * |

CR | −0.037 | −0.006 | −0.003 | −0.013 | −0.030 | −0.044 | −0.021 | −0.039 | 0.032 | 0.052 | −0.061 | −0.050 |

Below-median firms | ||||||||||||

ROA | −0.054 * | −0.056 * | 0.396 *** | 0.363 *** | 0.002 | 0.121 *** | 0.301 *** | 0.322 *** | −0.078 * | −0.149 *** | 0.365 *** | 0.357 *** |

ROE | 0.008 | 0.049 * | 0.019 | 0.034 | 0.040 | 0.174 *** | −0.075 * | 0.021 | −0.004 | −0.040 | −0.050 | −0.049 |

CR | −0.039 | −0.123 *** | 0.027 | 0.006 | −0.058 | −0.121 *** | −0.018 | −0.026 | 0.021 | −0.084 * | −0.026 | −0.014 |

C. Diversified | ||||||||||||

Above-median firms | ||||||||||||

ROA | −0.087 | −0.069 | 0.019 | 0.009 | −0.256 | −0.333 | 0.128 | 0.026 | −0.170 | −0.129 | −0.102 | 0.111 |

ROE | −0.332 *** | 0.059 | −0.158 * | 0.051 | −0.410 * | −0.128 | −0.333 | −0.308 | −0.323 *** | 0.154 | −0.229 ** | 0.114 |

CR | −0.272 *** | −0.125 | −0.327 *** | −0.143 | −0.205 | −0.103 | −0.103 | −0.154 | −0.235 ** | −0.035 | 0.029 | 0.003 |

Below-median firms | ||||||||||||

ROA | −0.186 * | 0.037 | −0.141 | 0.046 | 0.209 | 0.143 | −0.275 | −0.231 | −0.192 * | 0.122 | 0.038 | 0.086 |

ROE | −0.148 | 0.016 | −0.091 | 0.002 | −0.143 | −0.033 | −0.341 * | −0.407 ** | −0.145 | 0.030 | −0.038 | −0.035 |

CR | −0.134 | −0.098 | −0.078 | −0.125 | −0.143 | 0.099 | −0.407 ** | −0.385 * | −0.069 | −0.117 | −0.177 | −0.180 |

C1. Diversified-related | ||||||||||||

Above-median firms | ||||||||||||

ROA | −0.020 | −0.014 | −0.060 | 0.037 | 0.500 * | 0.500 * | −0.143 | 0.000 | −0.355 ** | −0.368 ** | −0.190 | −0.190 |

ROE | −0.210 | 0.056 | −0.225 * | 0.045 | −0.056 | 0.722 *** | −0.333 | −0.278 | −0.303 * | −0.289 * | −0.516 *** | −0.294 * |

CR | −0.217 * | −0.169 | −0.280 ** | −0.222 * | −0.167 | 0.000 | −0.111 | 0.000 | −0.229 | −0.124 | −0.242 | −0.281 * |

Below-median firms | ||||||||||||

ROA | −0.084 | 0.119 | −0.084 | 0.163 | 0.244 | 0.244 | −0.511 ** | −0.467 * | 0.066 | 0.434 ** | 0.124 | 0.190 |

ROE | −0.008 | 0.220 | 0.040 | 0.215 | 0.111 | −0.056 | −0.333 | −0.333 | 0.145 | 0.485 *** | 0.072 | 0.137 |

CR | −0.319 ** | −0.138 | −0.319 ** | −0.154 | −0.611 ** | −0.333 | −0.222 | −0.222 | −0.160 | −0.041 | −0.076 | −0.099 |

C2. Diversified-unrelated | ||||||||||||

Above-median firms | ||||||||||||

ROA | −0.203 | −0.152 | −0.203 | −0.143 | 0.600 | 0.400 | 0.200 | 0.000 | −0.085 | −0.033 | −0.085 | 0.163 |

ROE | −0.377 ** | −0.022 | −0.429 *** | −0.048 | 0.000 | −1.000 *** | −0.667 | −1.000 *** | −0.373 ** | 0.294 * | −0.163 | 0.425 ** |

CR | −0.333 ** | −0.074 | −0.333 ** | −0.100 | −0.333 | −0.333 | 0.667 | 0.667 | −0.333 * | −0.072 | 0.190 | 0.203 |

Below-median firms | ||||||||||||

ROA | −0.352 ** | −0.178 | −0.352 ** | −0.194 | −0.667 | −1.000 *** | 0.000 | 0.000 | −0.451 *** | −0.190 | 0.020 | 0.033 |

ROE | −0.336 ** | −0.273 * | −0.217 | −0.328 ** | −0.400 | −0.400 | −0.200 | −0.800 ** | −0.425 ** | −0.333 * | −0.176 | −0.229 |

CR | −0.138 | −0.012 | 0.138 | −0.051 | 0.600 | 0.800 ** | −0.600 | −0.600 | 0.150 | −0.020 | −0.255 | −0.307 * |

**Table 5.**Kendall’s correlation results. This table provides Kendall’s τ correlation results for the overall sample of 2666 firms partition-wise (i.e., size, age, leverage and liquidity (which are instrumental/control variables here)). First, all such firms are divided into above- and below-median firms based on cross-sectional median values of each of these control variables. Thus, this study obtains large and small firms (size-partitions), old and young firms (age-partitions), high-leverage and low-leverage firms (leverage-partitions) and high-liquidity and low-liquidity firms [liquidity-partitions]. After that, we sub-divide all such partitions-firms into above- and below-median firms based on cross-sectional median values of returns measures. We calculate for 1-year and 5-year time periods on a rolling basis.

Overall | Developed | Emerging | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|

A. Size-partitions | ||||||||||||

A1. Large | ||||||||||||

Above-median firms | ||||||||||||

Variables | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} |

ROA | −0.019 | 0.043 * | 0.003 | 0.053 ** | −0.103 *** | −0.001 | 0.100 *** | 0.148 *** | 0.027 | 0.067 * | 0.065 * | 0.119 *** |

ROE | −0.121 *** | 0.064 ** | −0.037 | 0.017 | −0.122 *** | 0.107 *** | −0.095 ** | 0.000 | −0.130 *** | 0.064 * | −0.060 * | −0.007 |

CR | −0.067 *** | −0.031 | −0.009 | −0.003 | −0.077 ** | −0.075 * | −0.057 | −0.077 ** | −0.056 | −0.012 | 0.030 | 0.040 |

Below-median firms | ||||||||||||

ROA | −0.104 *** | −0.027 | .312 *** | 0.291 *** | 0.019 | 0.120 *** | 0.202 *** | 0.213 *** | −0.149 *** | −0.090 *** | 0.285 *** | 0.260 *** |

ROE | −0.082 *** | 0.001 | −0.082 *** | −0.051 ** | −0.061 | 0.086 ** | −0.063 | 0.001 | −0.073 ** | −0.066 * | −0.102 *** | −0.092 *** |

CR | −0.074 *** | −0.127 *** | −0.018 | −0.036 | −0.006 | −0.084 ** | −0.038 | −0.046 | −0.017 | −0.055 | 0.003 | 0.020 |

A2. Small | ||||||||||||

Above-median firms | ||||||||||||

ROA | 0.033 | 0.112 *** | −0.004 | 0.054 ** | 0.036 | 0.107 *** | 0.125 *** | 0.145 *** | 0.001 | 0.123 *** | 0.064 * | 0.117 *** |

ROE | −0.075 *** | 0.081 *** | −0.065 ** | 0.001 | −0.064 * | 0.092 ** | −0.055 | 0.004 | −0.095 *** | 0.065 * | −0.030 | 0.011 |

CR | 0.026 | 0.069 *** | 0.010 | 0.038 | −0.020 | 0.021 | −0.027 | −0.020 | 0.046 | 0.045 | −0.060 * | −0.068 * |

Below-median firms | ||||||||||||

ROA | 0.052 ** | 0.079 *** | −0.014 | 0.049 * | 0.081 ** | 0.093 ** | 0.123 *** | 0.181 *** | 0.059 * | 0.052 | 0.029 | 0.053 |

ROE | 0.104 *** | 0.056 ** | −0.058 ** | −0.001 | 0.101 *** | 0.131 *** | −0.085 ** | 0.001 | 0.123 *** | −0.001 | 0.000 | 0.023 |

CR | 0.022 | −0.033 | −0.018 | −0.027 | 0.076 ** | 0.066 * | −0.060 | −0.060 | 0.010 | −0.043 | −0.165 *** | −0.172 *** |

B. Age-partitions | ||||||||||||

B1. Old | ||||||||||||

Above-median firms | ||||||||||||

ROA | 0.003 | 0.074 *** | −0.033 | 0.033 | 0.039 | 0.092 ** | 0.110 *** | 0.176 *** | 0.034 | 0.080 ** | 0.043 | 0.110 *** |

ROE | −0.099 *** | 0.083 *** | −0.054 ** | 0.018 | −0.087 ** | 0.100 *** | −0.130 *** | −0.013 | −0.069 ** | 0.070 ** | −0.064 * | −0.002 |

CR | 0.022 | 0.063 ** | −0.003 | 0.029 | 0.025 | 0.041 | −0.079 ** | −0.077 ** | 0.006 | 0.052 | 0.011 | 0.019 |

Below-median firms | ||||||||||||

ROA | −0.026 | −0.011 | 0.259 *** | 0.243 *** | −0.017 | 0.049 | 0.134 *** | 0.121 *** | −0.095 *** | −0.077 ** | 0.251 *** | 0.241 *** |

ROE | −0.011 | 0.045 * | −0.118 *** | −0.050 * | 0.001 | 0.119 *** | −0.050 | 0.007 | −0.066 * | −0.051 | −0.095 *** | −0.052 |

CR | −0.081 *** | −0.144 *** | 0.007 | −0.024 | −0.030 | −0.091 ** | −0.062 | −0.066 * | 0.000 | −0.085 ** | −0.002 | 0.020 |

B2. Young | ||||||||||||

Above-median firms | ||||||||||||

ROA | −0.003 | 0.086 *** | 0.048 * | 0.084 *** | −0.037 | 0.055 | 0.123 *** | 0.147 *** | −0.012 | 0.102 *** | 0.082 ** | 0.129 *** |

ROE | −0.108 *** | 0.051 ** | −0.023 | 0.011 | −0.074 | 0.093 ** | −0.026 | 0.016 | −0.121 *** | 0.033 | −0.047 | −0.008 |

CR | −0.033 | 0.003 | 0.015 | 0.020 | −0.013 | 0.011 | 0.017 | 0.010 | −0.029 | −0.004 | −0.032 | −0.044 |

Below-median firms | ||||||||||||

ROA | −0.025 | −0.020 | 0.107 *** | 0.138 *** | 0.032 | 0.048 | 0.186 *** | 0.233 *** | 0.007 | −0.015 | 0.079 ** | 0.085 ** |

ROE | 0.072 *** | 0.036 | −0.040 | 0.004 | 0.052 | 0.104 *** | −0.110 *** | −0.014 | 0.112 *** | −0.010 | −0.001 | −0.007 |

CR | 0.026 | −0.028 | −0.003 | −0.003 | 0.019 | −0.002 | −0.025 | −0.041 | 0.025 | −0.017 | −0.145 *** | −0.148 *** |

C. Leverage-partitions | ||||||||||||

C1. High-leverage | ||||||||||||

Above-median firms | ||||||||||||

ROA | 0.022 | 0.105 *** | −0.015 | 0.055 ** | 0.048 | 0.129 *** | 0.118 *** | 0.203 *** | 0.005 | 0.084 ** | 0.128 *** | 0.148 *** |

ROE | −0.105 *** | 0.120 *** | −0.026 | 0.066 *** | −0.062 | 0.116 *** | −0.095 ** | −0.016 | −0.136 *** | 0.073 ** | −0.069 ** | −0.003 |

CR | −0.035 | −0.014 | −0.035 | −0.022 | −0.057 | −0.038 | −0.027 | −0.038 | 0.011 | 0.010 | −0.053 | −0.067 * |

Below-median firms | ||||||||||||

ROA | −0.057 ** | −0.053 ** | 0.078 *** | 0.071 *** | −0.031 | −0.034 | 0.096 ** | 0.123 *** | 0.004 | 0.019 | 0.100 *** | 0.089 ** |

ROE | 0.062 ** | 0.026 | −0.012 | 0.014 | 0.024 | 0.082 ** | −0.079 ** | −0.018 | 0.092 *** | 0.011 | −0.017 | −0.017 |

CR | 0.008 | −0.078 *** | 0.004 | −0.011 | 0.045 | −0.028 | −0.069 * | −0.073 * | 0.053 | −0.019 | −0.126 *** | −0.120 *** |

C2. Low-leverage | ||||||||||||

Above-median firms | ||||||||||||

ROA | −0.021 | 0.046 * | 0.005 | 0.037 | −0.017 | 0.048 | 0.118 *** | 0.132 *** | 0.014 | 0.084 ** | 0.041 | 0.120 *** |

ROE | −0.090 *** | 0.042 | −0.049 * | −0.012 | −0.105 *** | 0.061 | −0.053 | 0.005 | −0.079 ** | 0.033 | −0.040 | 0.011 |

CR | 0.028 | 0.077 *** | 0.011 | 0.041 | 0.044 | 0.078 ** | −0.043 | −0.033 | −0.024 | 0.037 | 0.002 | 0.024 |

Below-median firms | ||||||||||||

ROA | −0.012 | −0.021 | 0.268 *** | 0.279 *** | 0.003 | 0.083 ** | 0.205 *** | 0.215 *** | −0.055 | −0.095 *** | 0.211 *** | 0.227 *** |

ROE | −0.007 | 0.026 | −0.114 *** | −0.063 ** | 0.012 | 0.134 *** | −0.066 * | 0.029 | −0.009 | −0.049 | −0.069 ** | −0.059 * |

CR | −0.070 *** | −0.098 *** | 0.046 * | 0.025 | −0.020 | −0.026 | −0.052 | −0.059 | −0.025 | −0.072 ** | 0.014 | 0.010 |

D. Liquidity-partitions | ||||||||||||

D1. High-liquidity | ||||||||||||

Above-median firms | ||||||||||||

ROA | −0.029 | 0.032 | 0.013 | 0.046 * | −0.067 * | 0.036 | 0.105 *** | 0.135 *** | 0.002 | 0.035 | 0.075 ** | 0.120 *** |

ROE | −0.116 ** | 0.068 *** | −0.059 ** | −0.001 | −0.094 ** | 0.148 *** | −0.109 *** | −0.023 | −0.109 *** | 0.029 | −0.055 | −0.015 |

CR | −0.068 *** | −0.026 | −0.009 | −0.005 | −0.017 | −0.014 | −0.026 | −0.040 | −0.087 ** | −0.046 | −0.016 | 0.002 |

Below-median firms | ||||||||||||

ROA | −0.065 ** | 0.004 | 0.319 *** | 0.303 *** | 0.025 | 0.129 *** | 0.210 *** | 0.221 *** | −0.108 *** | −0.083 ** | 0.257 *** | 0.248 *** |

ROE | −0.048 * | 0.023 | −0.061 ** | −0.025 | −0.048 | 0.114 *** | −0.029 | 0.024 | −0.045 | −0.069 ** | −0.074 ** | −0.065 * |

CR | −0.069 *** | −0.120 *** | −0.023 | −0.036 | −0.018 | −0.080 ** | −0.063 | −0.073 * | 0.005 | −0.049 | 0.009 | 0.021 |

D2. Low-liquidity | ||||||||||||

Above-median firms | ||||||||||||

ROA | 0.036 | 0.118 *** | −0.021 | 0.052 ** | −0.001 | 0.085 ** | 0.117 *** | 0.158 *** | 0.013 | 0.153 *** | 0.086 ** | 0.150 *** |

ROE | −0.084 *** | 0.072 *** | −0.042 | 0.021 | −0.075 * | 0.068 * | −0.033 | 0.030 | −0.127 *** | 0.095 *** | −0.047 | 0.023 |

CR | 0.035 | 0.078 *** | 0.018 | 0.050 * | −0.036 | 0.009 | −0.002 | −0.003 | 0.046 | 0.061 * | −0.033 | −0.052 |

Below-median firms | ||||||||||||

ROA | 0.011 | 0.024 | 0.006 | 0.051 ** | 0.063 * | 0.048 | 0.116 *** | 0.171 *** | 0.033 | 0.030 | 0.048 | 0.055 |

ROE | 0.085 *** | 0.042 * | −0.066 ** | −0.014 | 0.100 *** | 0.106 *** | −0.123 *** | −0.029 | 0.096 *** | −0.004 | −0.009 | 0.005 |

CR | 0.016 | −0.049 * | 0.035 | 0.015 | 0.048 | 0.022 | −0.057 | −0.060 | 0.004 | −0.042 | −0.140 *** | −0.140 *** |

**Table 6.**Kendall’s correlation results. This table provides Kendall’s τ correlation results for the overall sample of 2666 firms (1199 firms from 15 developed countries and 1467 firms from 12 emerging countries) after dividing them in above- and below-median firms based on cross-sectional median values in bull and bear sub-periods. We calculate for 1-year and 5-year time periods on a rolling basis.

Overall | Developed | Emerging | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|

A. Bull periods | ||||||||||||

Above-median firms | ||||||||||||

Variables | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} | FTR_{1 year} | FTR_{5 years} | ITR_{1 year} | ITR_{5 years} |

ROA | 0.077 *** | 0.103 *** | −0.028 | −0.001 | 0.058 ** | 0.079 *** | −0.055 ** | −0.055 ** | 0.085 *** | 0.129 *** | −0.008 | 0.046 * |

ROE | 0.049 *** | 0.085 *** | −0.028 | −0.013 | 0.027 | 0.043 | −0.001 | −0.015 | 0.052 ** | 0.113 *** | −0.052 ** | −0.013 |

CR | 0.005 | 0.036 * | −0.005 | 0.002 | −0.008 | 0.041 | 0.010 | 0.006 | 0.001 | 0.016 | −0.023 | −0.016 |

Below-median firms | ||||||||||||

ROA | 0.072 *** | 0.036 ** | 0.076 *** | 0.052 *** | 0.070 *** | 0.070 ** | 0.031 | 0.015 | 0.079 *** | 0.023 | 0.109 *** | 0.085 *** |

ROE | 0.066 *** | 0.062 *** | −0.003 | −0.008 | 0.107 *** | 0.158 *** | 0.011 | −0.014 | 0.045 * | −0.008 | −0.005 | 0.005 |

CR | 0.017 | −0.012 | 0.043 ** | 0.018 | 0.039 | −0.013 | 0.001 | −0.017 | 0.012 | 0.012 | 0.004 | −0.012 |

B. Bear periods | ||||||||||||

Above-median firms | ||||||||||||

ROA | −0.031 * | 0.063 *** | 0.014 | 0.016 | −0.004 | 0.093 *** | −0.009 | 0.003 | −0.053 ** | 0.046 * | 0.052 ** | 0.046 * |

ROE | −0.009 | 0.057 *** | −0.002 | 0.003 | 0.017 | 0.089 *** | −0.008 | −0.023 | −0.048 * | 0.018 | −0.016 | 0.004 |

CR | 0.046 ** | 0.021 | 0.027 | 0.021 | 0.045 * | 0.031 | 0.013 | 0.027 | 0.030 | 0.019 | 0.045 * | 0.039 |

Below-median firms | ||||||||||||

ROA | −0.146 *** | −0.069 *** | −0.006 | −0.010 | −0.097 *** | −0.006 | −0.064 ** | −0.055 ** | −0.175 *** | −0.111 *** | 0.040 | 0.025 |

ROE | −0.101 *** | −0.059 *** | −0.024 | −0.024 | −0.034 | 0.006 | −0.006 | −0.008 | −0.147 *** | −0.105 *** | −0.037 | −0.032 |

CR | −0.074 *** | −0.064 *** | 0.014 | 0.006 | −0.112 *** | −0.075 *** | −0.057 ** | −0.073 *** | −0.045 * | −0.039 | 0.039 | 0.034 |

**Table 7.**Multivariate regression results. This table provides multivariate regression results (see Equation (2)) for overall sample of 2666 firms after dividing them in above- and below-median firms based on cross-sectional median values. Here, ROA (risk) is the dependent variable and firm’s return, distance (DT) from firm-adjusted and industry-adjusted target returns are main and other independent variables. Here ROA stands for return on assets, ROE implies return on equity and CR denotes cash ratio. In addition, FTR stands for firm-adjusted target return and ITR implies industry-adjusted target return. We calculate for 1 year and 5 years’ time-periods on a rolling basis. In addition, the instrumental/control variables of size, age, leverage and liquidity are incorporated in the model. To make it more robust, dummy variables of related and unrelated diversified firms, financial services firms and country (emerging/developed) are also included. The table also shows the results pertaining to developed and emerging market firms separately.

Measures | Variables | Overall | Developed | Emerging | |||
---|---|---|---|---|---|---|---|

Above | Below | Above | Below | Above | Below | ||

ROA | ROA_{f,t} | 0.125 *** (0.019) | −0.864 *** (0.026) | 0.063 * (0.033) | −0.556 *** (0.035) | 0.198 *** (0.023) | −1.005 *** (0.044) |

DTFTR_{1 year} | −1.746 *** (0.240) | −1.240 *** (0.292) | −2.232 *** (0.320) | −1.497 *** (0.440) | 0.032 (0.380) | −1.556 *** (0.372) | |

DTFTR_{5 years} | 1.520 *** (0.194) | 0.884 *** (0.271) | 2.193 *** (0.260) | 1.764 *** (0.389) | −0.268 (0.303) | 0.708 ** (0.361) | |

DTITR_{1 year} | 0.881 *** (0.194) | 0.312 (0.272) | 1.300 *** (0.272) | 0.590 (0.381) | −0.313 (0.281) | 0.107 (0.351) | |

DTITR_{5 years} | −0.926 *** (0.193) | −0.213 (0.272) | −1.359 *** (0.272) | −0.599 (0.380) | 0.267 (0.279) | 0.049 (0.354) | |

R^{2} | 0.176 | 0.528 | 0.289 | 0.616 | 0.136 | 0.568 | |

Adjusted R^{2} | 0.169 | 0.523 | 0.274 | 0.608 | 0.122 | 0.561 | |

F | 23.547 *** | 122.836 *** | 19.798 *** | 78.674 *** | 9.481 *** | 78.958 *** | |

ROE | ROE_{f,t} | −1.090 *** (0.021) | −1.090 *** (0.034) | 0.388 *** (0.024) | −0.585 *** (0.039) | 0.267 *** (0.037) | −1.363 *** (0.045) |

DTFTR_{1 year} | −1.080 *** (0.129) | −1.080 *** (0.062) | −1.215 *** (0.156) | 0.171 (0.268) | −1.297 *** (0.212) | −0.950 *** (0.077) | |

DTFTR_{5 years} | 2.210 *** (0.057) | 2.210 *** (0.005) | 0.508 *** (0.073) | 0.449 * (0.255) | 0.944 *** (0.086) | 2.206 *** (0.005) | |

DTITR_{1 year} | −0.024 *** (0.072) | −0.024 (0.071) | −0.232 ** (0.094) | −0.352 (0.277) | −0.115 (0.107) | 0.120 (0.090) | |

DTITR_{5 years} | 0.006 ** (0.003) | 0.006 (0.005) | 0.006 ** (0.003) | 0.254 (0.280) | 0.006 (0.005) | 0.004 (0.005) | |

R^{2} | 0.378 | 0.538 | 0.513 | 0.407 | 0.292 | 0.558 | |

Adjusted R^{2} | 0.372 | 0.525 | 0.503 | 0.395 | 0.280 | 0.541 | |

F | 66.810 *** | 78.003 *** | 51.385 *** | 33.546 *** | 24.740 *** | 72.89 *** | |

CR | CR_{f,t} | 1.217 *** (0.012) | −0.970 *** (0.020) | 0.342 *** (0.027) | −0.335 *** (0.038) | 1.327 *** (0.013) | −1.045 *** (0.024) |

DTFTR_{1 year} | 0.144 (0.401) | 0.509 (0.338) | 1.506 *** (0.361) | −0.914 *** (0.346) | −0.419 (0.565) | 0.744 (0.488) | |

DTFTR_{5 years} | −0.389 (0.416) | −0.188 (0.322) | −0.103 (0.345) | 1.146 *** (0.277) | −0.353 (0.596) | −0.309 (0.481) | |

DTITR_{1 year} | 0.914 ** (0.400) | 0.237 (0.275) | −0.250 (0.363) | 0.507 ** (0.247) | 1.615 *** (0.565) | 0.338 (0.403) | |

DTITR_{5 years} | −1.101 ** (0.433) | −0.248 (0.303) | 0.185 (0.355) | −0.559 ** (0.270) | −1.810 *** (0.624) | −0.355 (0.444) | |

R^{2} | 0.488 | 0.678 | 0.441 | 0.258 | 0.594 | 0.764 | |

Adjusted R^{2} | 0.476 | 0.675 | 0.430 | 0.242 | 0.584 | 0.760 | |

F | 92.521 *** | 23.177 *** | 42.055 *** | 16.977 *** | 94.109 *** | 94.675 *** |

ROA SD | CR SD | |||
---|---|---|---|---|

Above | Below | Above | Below | |

ROA | + *** | + *** | ||

CR | + *** | − *** | ||

DTFTR_{1 year} | + *** | − *** | − | + *** |

DTFTR_{5 years} | − *** | + *** | − *** | + *** |

DTITR_{1 year} | + * | − | + | + |

DTITR_{5 years} | − | + | − | + |

Size | − *** | + *** | + | − *** |

Age | + *** | − | + *** | − *** |

Liquidity | + | + *** | + | + |

Leverage | + | + | − | − *** |

L1.ROASD | + *** | − *** | − *** | |

L1.CRSD | − *** | − *** | ||

Constant | − *** | + *** | + | + *** |

© 2018 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).

## Share and Cite

**MDPI and ACS Style**

Gupta, R.D.; Pathak, R.
Firm’s Risk-Return Association Facets and Prospect Theory Findings—An Emerging versus Developed Country Context. *Risks* **2018**, *6*, 143.
https://doi.org/10.3390/risks6040143

**AMA Style**

Gupta RD, Pathak R.
Firm’s Risk-Return Association Facets and Prospect Theory Findings—An Emerging versus Developed Country Context. *Risks*. 2018; 6(4):143.
https://doi.org/10.3390/risks6040143

**Chicago/Turabian Style**

Gupta, Ranjan Das, and Rajesh Pathak.
2018. "Firm’s Risk-Return Association Facets and Prospect Theory Findings—An Emerging versus Developed Country Context" *Risks* 6, no. 4: 143.
https://doi.org/10.3390/risks6040143