Effects Of Entrepreneurs Risk Appetite For Investment Decision Behavior

As the leader and decision maker of the enterprise, entrepreneurs have the highest decision-making authority of the enterprise. Entrepreneurs play the key roles on the effectiveness of decision-making in the enterprise. The risk preference of entrepreneurs directly affects the decision-making behavior, and thus the risk preference of entrepreneurs impacts on firms’ investment decision-making behavior. The sustainable and high speed development of Chinese economy in the economic reform in more than20years has caused the wide attention of scholars both at home and abroad. They have built a lot of economic models to study Chinese actual economic conditions. In these studies and models, risk preference is an extremely important influence factors. The set of the risk preference played an important influence on the analysis of the model. And in these studies, the set of the risk preference factor is imperfect as various factors’ affection. The assignment is given by the theoretical parameters or directly derived from the parameters values of similar index in the other research literature, and is lack of the corresponding empirical analysis. These all made the study models of Chinese economy serious distortion. And in the field of enterprise decision-making research, the development of behavioral economy and experimental economy allows researchers to pay more and more attention to the individual differences between entrepreneurs who are decision makers of enterprises. They introduced the research achievements of psychology, especially of cognitive psychology to analysis and interpret the entrepreneur’s decision-making behavior. The multitudinous factors including age, gender, knowledge level, cultural background, technology type of engaging, experience, cognitive environment and the area of familiar and concerning lead to the difference of entrepreneur’s cognition. The unique information reaction according to different entrepreneurs’ own preferences will have an effect on decision-making behavior. Therefore, an empirical analysis on the entrepreneurs’ risk preference which has decision role on decision-making behavior has been carried in this paper. And then the empirical study on the impact of entrepreneur’s risk preference on the investment decision-making behavior of enterprises has also been carried.The paper is divided into six parts. In the first part, the paper’s research contents, technical route and research methods are proposed on the basis of research background, research objective and research significance. The second part is the research review of the relevant theories. This aims to summarize and review the related research at home and abroad, specifically, to review the relationship research between entrepreneurs’ risk preference and decision-making behavior from domestic and foreign scholars based on the respectively review of entrepreneurs’ risk preference theory, bounded rationality theory and behavioral decision theory. The third part is the influence mechanism of entrepreneurs’ risk preference on entrepreneurial decision. This aims to provide a theoretical basis for the behind research. The fourth part is the comprehensive evaluation on the entrepreneurs’ risk preference. In this part, we selected indexes from two dimensions of entrepreneurs personal and company based on the entrepreneurs’ external performance in the daily life and work, constructed the comprehensive evaluation model of entrepreneurs’ risk preference level, used principal component analysis (PCA) to evaluate entrepreneurs’ risk preference level from2008to2011comprehensively, and inspected the influence of the entrepreneurs’ background characteristics on entrepreneurs’ risk preference through the empirical research. The fifth part is empirical test of entrepreneurs’ risk preference on the enterprise investment decision. In this part, we built multivariate regression models to summarize the relationship between the entrepreneurs’ risk preference and investment decision-making behavior and carried on the empirical test of entrepreneurs’ risk preference on the enterprise cash decisions, the correlation of M&A and capital expenditure decision respectively by the use of the data in listed companies from2008to2011.The sixth part the research conclusion and prospect this paper.In this paper, we have got the following research conclusion on the basis of the above research. These conclusions also constituted the innovation of the article.The First is the influence mechanism of entrepreneurs’ risk preference on enterprise’s investment decision. Entrepreneurs in the enterprise decision-making position have the right to choose and change various strategic investment plans to affect the entire enterprise investment decision. Entrepreneurs show the different risk preference at the influence of individual psychological characteristics and corporate governance level. And entrepreneur’s risk preference is an important determinant factor of corporate investment decisions. Risk aversion entrepreneurs prefer the safe cash assets and fixed assets with less risk, but risk appetite entrepreneurs prefer intangible assets investment. This can lead to the difference on the assets form of enterprise investment. In the specific process of choosing projects, merger and acquisition projects with high risk for risk appetite entrepreneurs are more attractive. So they will increase investments on high-risk projects. At the same time, risk appetite entrepreneurs tend to expand the scale of investment, speed up the investment, caused the excessive and high frequency investment, lead to low efficiency of corporate investment. Therefore, entrepreneurs’risk preference will affect investment decisions process of cash holdings, M&A and capital expenditure.The second is the comprehensive evaluation on the entrepreneurs’ risk preference. In this paper, we selected indexes from two dimensions of entrepreneurs personal and company based on the entrepreneurs’ external performance in the daily life and work, constructed the comprehensive evaluation model of entrepreneurs’ risk preference level, used principal component analysis (PCA) to evaluate entrepreneurs’ risk preference level from2008to2011comprehensively, and inspected the influence of the entrepreneurs’ background characteristics on entrepreneurs’ risk preference through the empirical research. The results show:there is significant positive correlation between degree and entrepreneurs risk preference which means that the degree is higher, entrepreneurs more tend to be risk averse; there is significant positive correlation between entrepreneurs’ personal wealth and the entrepreneurs’ risk preference which is due to with the improvement of entrepreneur’s personal wealth, entrepreneurs personal consumption gradually no longer subject to the business activities of life reward, more can rest assured bold adventure, so the performance of risk appetite. There is not significant correlation between entrepreneur’s age, gender and tenure and entrepreneurs’ risk preference which means that entrepreneur’s age, gender and tenure have no obvious effect on entrepreneurs’ risk preference.The third is empirical test of entrepreneurs’ risk preference on the enterprise investment decision. In this paper, we built multivariate regression models to summarize the relationship between the entrepreneurs’ risk preference and investment decision-making behavior and carried on the empirical test of entrepreneurs’ risk preference on the enterprise cash decisions, the correlation of M&A and capital expenditure decision respectively by the use of the data in listed companies from2008to2011. The results show: there is significant negative correlation relationship between entrepreneurs’ risk preference and the corporate cash holdings level which means that the stronger of entrepreneurs’ risk preference degree, the less of corporate cash holdings; there is significant positive correlation between entrepreneurs’ risk preference and the frequency of mergers and acquisitions which means that the stronger of entrepreneurs’ risk preference degree, merger and acquisition activity in enterprise more frequently:there is significant positive correlation between entrepreneurs’ risk preference and enterprise capital expenditure structure which means that the stronger of entrepreneurs’ risk preference degree, the greater proportion of risk assets in enterprise’s capital expenditure structure.