TMT Risk Tolerance, Corporate Entrepreneurship And Firm Value Of Main-board Listed Companies In China

In the highly competitive market, companies must flexibly adjust development strategy to conform to the trend of the times, if they want to be invincible. The biggest problem large companies often encountered in the process of growth and development is the second venture. With the advance of science and technology, the advantages of monopoly, capital and scale large companies ever obtained are becoming increasingly nonsignificant. On the contrary, large enterprises must constantly change to adapt to the new environment so as to achieve greater success, due to the technology-driven changes in production methods, so we should pay more attention to corporate entrepreneur ship. Unlike traditional business venture, corporate entrepreneurship is the second venture after the company has reached a certain size. Be different from entrepreneurship, corporate entrepreneurship concentrates on the integration of resources on the basis of existing resources, to enhance corporate performance through partial change.Since behavioral finance emerging, it creatively interprets the phenomenon that stumps the traditional expected utility theory and supports the views of people affected by cognitive biases in decision-making. In Kahneman and Tversky’s theory of prospect theory, cognitive differences between individuals, such as overconfidence, mental accounting and risk preference, will affect individual decision. Risk preference refers to decision-maker’s psychological attitude towards uncertainty, and at the same time is the characteristic of entrepreneur. Top managers often have to make financial decisions in the daily business operations, so risk preference is undoubtedly an important factor affecting decision making by managers. This paper studies context effect of TMT’s risk preference through the empirical analysis of three financial situations (innovativeness, self-renewal and proactiveness) respectively and explores influence of risk preference to firm value in the context of corporate entrepreneurship. In addition, the paper also studys the relationship between TMT’s risk preference and entrepreneurial activity in large organizations.Based on constructing top management team’s risk tolerance proxy and corporate entrepreneurship proxies respectively, this paper tests and confirms the relation between TMT’s risk preference and corporate entrepreneurship and their dynamic effect on firm value from the perspective of corporate entrepreneurship by taking2006-2013main-board listed companies in China as the sample. This study shows that:There is siginificantly negetive correlation between firm value and TMT’s risk tolerance; the less TMT’s risk-aversion is, the more likely firm engages in business venture; although corporate entrepreneurial activities have become effective ways for enterprises to achieve "value creation", including innovation, self-renewal and proactiveness, listed companies in China do not pay enough attention to it.