Tonic activity level in the right prefrontal cortex predicts individuals' risk taking

Human risk taking is characterized by a large amount of individual heterogeneity. In this study, we applied resting-state electroencephalography, which captures stable individual differences in neural activity, before subjects performed a risk-taking task. Using a source-localization technique, we found that the baseline cortical activity in the right prefrontal cortex predicts individual risk-taking behavior. Individuals with higher baseline cortical activity in this brain area display more risk aversion than do other individuals. This finding demonstrates that neural characteristics that are stable over time can predict a highly complex behavior such as risk-taking behavior and furthermore suggests that hypoactivity in the right prefrontal cortex might serve as a dispositional indicator of lower regulatory abilities, which is expressed in greater risk-taking behavior.

Disruption of right prefrontal cortex by low-frequency repetitive transcranial magnetic stimulation induces risk-taking behavior

Decisions require careful weighing of the risks and benefits associated with a choice. Some people need to be offered large rewards to balance even minimal risks, whereas others take great risks in the hope for an only minimal benefit. We show here that risk-taking is a modifiable behavior that depends on right hemisphere prefrontal activity. We used low-frequency, repetitive transcranial magnetic stimulation to transiently disrupt left or right dorsolateral prefrontal cortex (DLPFC) function before applying a well known gambling paradigm that provides a measure of decision-making under risk. Individuals displayed significantly riskier decision-making after disruption of the right, but not the left, DLPFC. Our findings suggest that the right DLPFC plays a crucial role in the suppression of superficially seductive options. This confirms the asymmetric role of the prefrontal cortex in decision-making and reveals that this fundamental human capacity can be manipulated in normal subjects through cortical stimulation. The ability to modify risk-taking behavior may be translated into therapeutic interventions for disorders such as drug abuse or pathological gambling.

Diminishing risk-taking behavior by modulating activity in the prefrontal cortex: a direct current stimulation study.

Studies have shown increased risk taking in healthy individuals after low-frequency repetitive transcranial magnetic stimulation, known to transiently suppress cortical excitability, over the right dorsolateral prefrontal cortex (DLPFC). It appears, therefore, plausible that differential modulation of DLPFC activity, increasing the right while decreasing the left, might lead to decreased risk taking, which could hold clinical relevance as excessively risky decision making is observed in clinical populations leading to deleterious consequences. The goal of the present study was to investigate whether risk-taking behaviors could be decreased using concurrent anodal transcranial direct current stimulation (tDCS) of the right DLPFC, which allows upregulation of brain activity, with cathodal tDCS of the left DLPCF, which downregulates activity. Thirty-six healthy volunteers performed the risk task while they received either anodal over the right with cathodal over the left DLPFC, anodal over the left with cathodal over the right DLPFC, or sham stimulation. We hypothesized that right anodal/left cathodal would decrease risk-taking behavior compared with left anodal/right cathodal or sham stimulation. As predicted, during right anodal/left cathodal stimulation over the DLPFC, participants chose more often the safe prospect compared with the other groups. Moreover, these participants appeared to be insensitive to the reward associated with the prospects. These findings support the notion that the interhemispheric balance of activity across the DLPFCs is critical in decision-making behaviors. Most importantly, the observed suppression of risky behaviors suggests that populations with boundless risk-taking behaviors leading to negative real-life consequences, such as individuals with addiction, might benefit from such neuromodulation-based approaches.

What Makes a Family Firm Innovative? CEO Risk-Taking Propensity and the Organizational Context of Family Firms

Investigating the new product portfolio innovativeness of family firms connects two important topics that have recently received considerable attention in innovation and family firm research. First, new product portfolio innovativeness has been identified as a critical determinant of firm performance. Second, research on family firms has focused on the questions of if and why family firms are more or less innovative than other organizational forms. Research investigating the innovativeness of family firms has often applied a risk-oriented perspective by identifying socioemotional wealth (SEW) as the main reference that determines firm behavior. Thus, prior research has mainly focused on the organizational context to predict innovation-related family firm behavior and neglected the impact of preferences and the behavior of the chief executive officer (CEO), which have both been shown to affect firm outcomes. Hence, this study aims to extend the previous research by introducing the CEO's disposition to organizational context variables to explain the new product portfolio innovativeness of small and medium-sized family firms. Specifically, this study explores how the organizational context (i.e., ownership by top management team [TMT] family members and generation in charge of the family firm) of family firms interacts with CEO risk-taking propensity to affect new product portfolio innovativeness. Using a sample of 114 German CEOs of small and medium-sized family firms operating in manufacturing industries, the results show that CEO risk-taking propensity has a positive effect on new product portfolio innovativeness. Moreover, the analyses show that the organizational context of family firms impacts the relationship between CEO risk-taking propensity and new product portfolio innovativeness. Specifically, the relationship between CEO risk-taking propensity and new product portfolio innovativeness is weaker if levels of ownership by TMT family members are high (high SEW). Additionally, the effect of CEO risk-taking propensity on new product portfolio innovativeness is stronger in family firms at earlier generational stages (high SEW). This result suggests that if SEW is a strong reference, family firm-specific characteristics can affect individual dispositions and, in turn, the behaviors of executives. Therefore, this study helps extend the knowledge on the determinants of new product portfolio innovativeness of family firms by considering an individual CEO preference and the organizational context variables of family firms simultaneously.

Sports after Busy Work: Work-Related Cognitive Failure Corresponds to Risk Bearing Behaviors and Athletic Injury

Although employees are encouraged to take exercise after work to keep physically fit, they should not suffer injury. Some sports injuries that occur after work appear to be work-related and preventable. This study investigated whether cognitive failure mediates the influence of mental work demands and conscientiousness on risk-taking and risky and unaware behaviour during after-work sports activities. Participants were 129 employees (36% female) who regularly took part in team sports after work. A structural equation model showed that work-related cognitive failure significantly mediated the influence of mental work demands on risky behaviour during sports (p < .05) and also mediated the directional link between conscientiousness and risky behaviour during sports (p < .05). A path from risky behaviour during sports to sports injuries in the last four weeks was also significant (p < .05). Performance constraints, time pressure, and task uncertainty are likely to increase cognitive load and thereby boost cognitive failures both during work and sports activities after work. Some sports injuries after work could be prevented by addressing the issue of work redesign.

Self-esteem development from age 14 to 30 years: A longitudinal study

We examined the development of self-esteem in adolescence and young adulthood. Data came from the Young Adults section of the National Longitudinal Survey of Youth, which includes 8 assessments across a 14-year period of a national probability sample of 7,100 individuals age 14 to 30 years. Latent growth curve analyses indicated that self-esteem increases during adolescence and continues to increase more slowly in young adulthood. Women and men did not differ in their self-esteem trajectories. In adolescence, Hispanics had lower self-esteem than Blacks and Whites, but the self-esteem of Hispanics subsequently increased more strongly, so that at age 30 Blacks and Hispanics had higher self-esteem than Whites. At each age, emotionally stable, extraverted, and conscientious individuals experienced higher self-esteem than emotionally unstable, introverted, and less conscientious individuals. Moreover, at each age, high sense of mastery, low risk taking, and better health predicted higher self-esteem. Finally, the results suggest that normative increase in sense of mastery accounts for a large proportion of the normative increase in self-esteem.

Social differentiation of risk: perceptions of the future in drought-prone Central Niger

A snapshot of two Tuareg-dominated 'communes rurales' in the pastoral-agricultural transition zones of Maradi and Tahoua regions, Central Niger, shows that, despite the openly shared 'inevitable natural hazard' drought discourse, risk-taking action in response to drought-related dangers is sharply polarized according to social position. On the one hand the dominant Tuareg minority perceive drought not only as danger for their herds but also as opportunity to increase their political following through the channelling of drought relief benefits to their supporters. On the other hand, the majority of commune households, living on the brink of economic viability, cultivate social links with the dominant families in order to secure access to water, land and humanitarian aid; and household members are forced into more and more frequent and distant out-migration. Certain leaders, well-informed about national land policy and practice, focus their efforts for a better future on the consolidation of community land rights through the promotion of certain sedentarization and land privatization initiatives; however the resulting increased land pressure in key locations may unwittingly expose inhabitants to even worse drought-linked crises in the future. Bibliogr., notes, sum. in English and French

Sleepiness and vigilance tests

Objective assessments of subjective complaints such as sleepiness, tiredness or fatigue using sleepiness and vigilance tests aim to identify its causes and to judge the fitness to drive or to work of the affected person. "Vigilance" comprises wakefulness, alertness and attention and is therefore not merely reciprocal to sleepiness. Since it is a complex phenomenon with several dimensions it is unlikely to be appropriately assessed by one single "vigilance test". One important dimension of vigilance discussed here is wakefulness with its counterpart of overt sleep and the whole spectrum of various levels in between. The transit zone between full wakefulness and overt sleep is mainly characterised by the subjective complaint of sleepiness, which cannot be measured directly. Only the consequences of reduced wakefulness such as a shortened sleep latency, slowed cognitive function and prolonged reaction time can be measured objectively. It is, therefore, more promising to combine a battery of subjective and objective tests to answer a specific question in order to achieve the most appropriate description for a given clinical or medicolegal situation. However even then we must keep in mind that many other important aspects of fitness to drive / fitness to work such as neurological, psychiatric and neuropsychological functions including risk taking behaviour are not covered by vigilance tests. A comprehensive, multidisciplinary approach is essential in such situations.

The Taxation of Bonuses and its Effect on Executive Compensation - Evidence from the UK Experience

This paper explores the reaction of compensation components awarded to executive directors of UK financial institutions following the adoption of the bonus tax in December 2009. Excessive bonuses are blamed for encouraging risk taking and are regarded as one of the pull factors of the financial crisis. The British government attempted to reduce bonuses and accordingly corporate risk-taking by means of a special tax on cashbased bonuses. Using a comprehensive dataset on executive compensation we show that the introduction of the bonus tax decreased the net cash bonuses awarded to directors by about 43%, accompanied however by a simultaneous increase in other compensation components leaving both variable as well as total compensation unaffected. Hence, the incidence of the bonus tax was borne by the firms which compensated their managers for the decrease in cash-based compensation by awarding them different forms of pay. Consistent with this finding our data also suggests that firms reduced dividend pay-outs as a consequence of the bonus tax.

A longitudinal cross-country study of entrepreneurial orientation

As recent research documents, there has been an impressive effort of studying the entrepreneurial orientation construct and its nomological role. However, most research has been very context specific and based on the analyses of cross-sectional information. We study causal performance effects from entrepreneurial orientation and its key dimensions in two economic contexts–developed and emerging markets. Gathering data on a sample of 94 firms in developed market context and 108 in emerging market context at two time-points we explore our hypotheses. The results suggest that in a developed economy entrepreneurial orientation has a positive impact on firm performance, whereas in the emerging market context this effect is negative. Furthermore, we assess the contribution of each dimension to the aggregate construct and reveal the importance of risk-taking in both contexts. Finally, we highlight the role of environmental dynamism and explain its varying effect

Three Essays on Age and Firm Performance

Old captains at the helm: Chairman age and firm performance Urs Waelchli and Jonas Zeller December, 2012 This paper examines whether the chairmen of the board (COBs) impose their life-cycles on the firms over which they preside. Using a large sample of unlisted firms we find a robust negative relation between COB age and firm performance. COBs age much like ‘ordinary’ people. Their cognitive abilities deteriorate and they experience significant shifts in motivation. Deteriorating cognitive abilities are the main driver of the performance effect that we observe. The results imply that succession planning problems in unlisted firms are real. Mandatory retirement age clauses cannot solve these problems. Corporate Aging around the World Jonas Zeller January, 2014 This paper examines whether firms internationally age as US firms do (Loderer, Stulz, and Wälchli, 2013). Using a large panel, I find that Tobin’s Q monotonically falls with firm Age across all nineteen countries in the sample. The decrease varies across countries but is generally extremely robust and economically significant. ROA, sales growth, and market share decrease over a firm’s lifetime in most countries as well. Furthermore, older firms reduce their capital expenditures and R&D outlays. Instead, they distribute more cash to their shareholders. Overall, the results suggest that corporate aging is not confined to the US but is a genuine phenomenon that affects listed firms worldwide. This evidence supports the hypothesis that corporate aging is driven by managers who optimally focus on managing their assets in place and neglect the development of growth opportunities. I finally ask whether the managers’ choice and with it the magnitude of the decline in Tobin’s Q is a function of country-level institutional settings. I find that most notably firms age faster in countries where employees are relatively well protected by labor regulation. Is employment protection the fountain of corporate youth? Claudio Loderer, Urs Wälchli, Jonas Zeller* September 2014 Acharya, Baghai, and Subramanian (2012, 2013) find that employment protection legislation (EPL) encourages innovation. We argue that this effect should be particularly strong in mature firms. We would therefore also expect EPL to boost growth opportunities. Using the natural Experiment created by the staggered passage of changes in EPL across seventeen countries, we find evidence that employment protection legislation does indeed stimulate Innovation efforts, especially in mature firms. The effect is stronger in countries in which patents are owned by the firm and in the context of regular contracts. Consistent with that, EPL encourages risk taking. Overall, however, there is Little evidence that the effect of EPL on innovation effort translates into higher firm value, not even in mature firms. EPL does motivate employees in those firms to put in a greater effort, as evidenced by stronger sales growth. Yet it also increases costs, reduces profitability, and depresses Tobin’s Q ratios in all firms, especially the mature ones, possibly because of the rigidities that characterize these firms [Loderer, Stulz, and Waelchli (2014)].