Abstract
We build a two-moment decision-theoretic framework to study how firms in the food-processing industry negotiate between risk and return while relying on imported inputs for production at an intensive margin. Two possibilities emerge: either a co-movement or a trade-off in risk and return under various industry and economic conditions. Building on our theoretical setting, we design a testable empirical framework that considers a panel of 316 firms in the Indian food-processing industry between 1993 and 2009. We find strong evidence of a decrease in the absolute risk aversion preference, although the magnitude varies measurably across firms.
| Original language | English |
|---|---|
| Pages (from-to) | 2176-2192 |
| Number of pages | 17 |
| Journal | International Journal of Finance and Economics |
| Volume | 29 |
| Issue number | 2 |
| Early online date | 17 Jan 2023 |
| DOIs | |
| Publication status | Published - 7 Apr 2024 |
Bibliographical note
This is the peer reviewed version of the following article: Mukherjee, S, Mukherjee, S, Parhi, M, Duan, K & Usman, A 2024, 'A risk–return trade‐off or co‐movement? Are food processing firms risk‐averse?', International Journal of Finance and Economics, vol. 29, no. 2, pp. 2176-2192, which has been published in final form at https://doi.org/10.1002/ijfe.2763. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.This document is the author’s post-print version, incorporating any revisions agreed during the peer-review process. Some differences between the published version and this version may remain and you are advised to consult the published version if you wish to cite from it.
Keywords
- exchange rate risk
- food-processing industry
- imported intermediate inputs
- mark-up estimation
- risk aversion elasticity
- risk preference
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics