Faculty Publications
Document Type
Article
Publication Version
Published Version
Keywords
consideration of future consequences, justification, payoff, personal risk profile, prior gain or loss
Journal/Book/Conference Title
Journal of Risk and Financial Management
Volume
17
Issue
2
First Page
1
Last Page
16
Abstract
This study examines (1) how risk–payoff preference can be affected by differences in consideration of future consequences (CFC), prior gain/loss, and personal risk profile, and (2) whether one’s risk–payoff preference may vary with justification prompts. Using an experimental design with 366 undergraduate business students, participants are tasked to make risk–payoff choices in two scenarios, with the combined risk–payoff outcomes serving as the dependent variable. In addition, participants are assessed on their personal risk profiles and also complete the 14-item CFC scale to gauge the propensity to take into account future consequences of their behaviors. Findings show that one who scores low (high) in CFC will prefer lower (higher) risk and payoff. Further, for an individual who scores high in CFC and has a prior gain (loss), he/she will be more inclined to prefer lower (higher) risk and payoff, though this effect is moderated by one’s risk profile. Finally, justification prompts help to reduce one’s propensity toward high risk–payoff, irrespective of prior gain/loss and risk profile considerations. With regard to consumers’ financial choices, particularly in a volatile economic environment, the findings here indicate that prompting for strategic justifications before making decisions can help lower one’s overall propensity toward high risk–payoff choices.
Department
Department of Accounting
Original Publication Date
2-1-2024
Object Description
1 PDF File
DOI of published version
10.3390/jrfm17020083
Repository
UNI ScholarWorks, Rod Library, University of Northern Iowa
Copyright
©2024 The Authors. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Language
en
File Format
application/pdf
Recommended Citation
Lee, W. Eric, "How Consideration of Future Consequences, Prior Gain or Loss, Personal Risk Profile, and Justification Affect Risk–Payoff Preferences" (2024). Faculty Publications. 5635.
https://scholarworks.uni.edu/facpub/5635
Comments
First published in Journal of Risk and Financial Management, v17 i2 published by MDPI. DOI: https://doi.org/10.3390/jrfm17020083