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Managerial risk-taking in peer to peer investments: A study of the Indian banking industry
, S Aulakh Preet
Published in Academy of Management
2018
Volume: 2018
   
Issue: 1
Abstract

Same industry peer to peer investments and transactions, like those of crypto- currency trading, financial disintermediation, small grid energy trading etc., are fast emerging as an interesting business phenomenon but with limited scholarly attention. Contextually, industry incumbents tend to know their peers better than extra-industry players. Consequently, information asymmetry based behavioural opportunism, impeding transactions, should ab-initio be at a lower level. Therefore will there (i) continue to be a positive association between risk and return or (ii) a negative association between risk and return – like Nash equilibrium or (iii) a reference framing effect? We endeavour to investigate this phenomenon by adopting the managerial risk return paradigm. Using the pseudo-controlled setting of the Indian commercial banking industry, we observed the intra-bank very short term (non-collateralized) peer investment preferences, as a function of the riskiness of the asset portfolio of the focal (investment receiving) peers. We used 133 months of granular data on all the 92 scheduled commercial banks, divided into 4 groups based on institutional ownership (private or state owned) and resource dependencies (close vs. loose linkage). Our results highlight risk return preference inversion along with a framing effect, contingent upon institutional ownership and extent of state monitoring and allocative control. Keywords: Managerial risk preferences; peer to peer investments; Indian commercial banking industry.

About the journal
JournalAcademy of Management Proceedings
PublisherAcademy of Management
Open AccessNo