Strategic Planning and Risk

An examination is made of the relationship between strategic planning and risk of common stocks. In this study, strategic planning is defined as the systematic process of determining the company's goals and objectives, as well as the strategies that will govern the acquisition and use of resour...

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Bibliographic Details
Published in:RBER, review of business and economic research review of business and economic research, 1981-10, Vol.17 (1), p.1
Main Author: Kudla, Ronald J
Format: Article
Language:English
Subjects:
Beta
Capital assets
Corporate planning
Effects
Long term planning
Polls & surveys
Questionnaires
Risk
Securities
Strategic
Strategic planning
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Summary:An examination is made of the relationship between strategic planning and risk of common stocks. In this study, strategic planning is defined as the systematic process of determining the company's goals and objectives, as well as the strategies that will govern the acquisition and use of resources to achieve these objectives. Earlier work has posited a relationship between strategic planning and risk, but this relationship has apparently never been formally tested. Such a test is provided in a capital asset pricing model framework. A questionnaire was sent to Fortune's 500 largest companies and 57 other firms. There were 328 usable responses. The questionnaire examined the use of strategic planning in these companies. The study investigated whether or not strategic decisions, made in response to changing external, environmental factors, affect a firm's risk characteristics. Using beta calculated from the market model as a risk measure, a temporary, but statistically insignificant, reduction in systematic risk was indicated in the period surrounding the month strategic planning was begun. Figures.
ISSN:1058-3300
0362-7985
1873-5924