Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/197395
Authors: 
Kasprowicz, Tomasz
Bednorz, Andrzej
Year of Publication: 
2017
Citation: 
[Journal:] e-Finanse: Financial Internet Quarterly [ISSN:] 1734-039X [Volume:] 13 [Year:] 2017 [Issue:] 4 [Pages:] 97-109
Abstract: 
In this paper we offer an alternative framework for examining why risk matters in the decisions of economic agents, and how the agent's risk attitude affects his decisions. This 'Threshold Theory' framework is based on a real options approach and the observation that in many situations an agent faces one or more thresholds in the payoff function. These thresholds influence the agent's risk attitude. The theory's predictions help to explain many anomalies that the standard expected utility model cannot. Threshold Theory can also model behavior in contexts such as individual investor decisions, corporate governance and other agency problems. Further, we examine CEO decisions as a function of time to the CEO's retirement to test predictions of the Theory.
Subjects: 
Decision-making under uncertainty
real options
agency theory
CEO behavior
JEL: 
G31
M15
D01
Persistent Identifier of the first edition: 
Document Type: 
Article

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