A review of research on the negative accounting relationship between risk and return: Bowman's paradox |
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| Institution: | 1. Department of Business Economics, Carlos III University, C Madrid, 126; 28903 Getafe-Madrid, Spain;2. Department of Business Administration, Accounting and Sociology, University of Jaén, Paraje las Lagunillas s/n; 23071 - Jaén, Spain;1. Department of Surgery, The University of Texas Medical Branch, Galveston, TX;2. Department of Internal Medicine, The University of Texas Medical Branch, Galveston, TX;3. Department of Surgery, The University of California, San Francisco-East Bay, Oakland, CA;4. Department of Surgery, The University of South Florida, Tampa, FL;1. Department of Urology, University of California, Irvine, Orange, CA;2. Department of Urology, Federal University of São Paulo, São Paulo, Brazil;3. Division of Urology, University of Toronto, Toronto, Canada;4. Department of Urology, University of Dusseldorf, Dusseldorf, Germany;1. Department of Radiation Oncology, Stritch School of Medicine, Loyola University Chicago, Chicago, IL;2. Department of Radiology, Stritch School of Medicine, Loyola University Chicago, Chicago, IL;1. IESEG School of Management (LEM-CNRS), Rue de la Digue 3, F-59000 Lille, France;2. University of Liège HEC Management School, Rue Louvrex 14, B-4000 Liège, Belgium;1. Faculty of Psychology and Educational Sciences, KU Leuven, Tiensestraat 102, 3000 Leuven, Belgium;2. Department of Developmental, Personality and Social Psychology, Ghent University, H. Dunantlaan 2, 9000 Ghent, Belgium;3. Research Group Psychiatry, KU Leuven, Kapucijnenvoer 33, 3000 Leuven, Belgium;4. Research Department of Clinical, Educational and Health Psychology, University College London, London, UK |
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| Abstract: | A cornerstone in finance theory continues to be the positive relationship between risk and return in spite of Fama and French (The Journal of Finance 47(2) (1992) 427–65) and several later papers finding no relationship between the two variables. Twelve years earlier, Bowman (Sloan Management Review 1980, pp. 17–31) studied the same relationship from organization theory, achieving similar results with accounting data, and developing a whole research stream known as “Bowman's paradox”. This stream has contributed to some curious and interesting ideas that could also be applied to other different streams: new risk measures, managerial goal selection, response to the decline in the organization, diversification strategy on risk and return, among others. Similar to the financial stream, a number of researchers have tried to study this issue from the strategic management perspective. Their inconclusive results have generated a considerable controversy, keeping this research stream alive. In this work, we describe and explore this phenomenon from “Bowman's paradox”, theoretical explanations, criticisms and future orientations. |
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