Search results

U.S. bank holding companies (BHCs) have experienced dynamic changes over a period of 2000–2010. We find that the size distribution of sample banks becomes highly positively skewed with a small number of big banks becoming super-sized, and these big banks tend to take extra risk by holding derivative positions for trading purposes. The ten largest risk-taking banks hold about 70% of total assets of all the sample banks in 2010. We investigate whether the risk-taking activities of the BHCs translate into higher risk-adjusted return performance. In extensive panel regression analyses, we find that the risk-taking strategies of large banks by holding derivative positions for trading purpose do not show the clear evidence of enhancing risk-adjusted performance. We find that negative impacts of extra risk-taking on the risk-adjusted performance become bigger with the size of banks.

Problemistic search is a central part of behavioral strategy because it is a fundamental step in the decision process leading to strategic change. Despite the significant research efforts so far, there is a gap in our understanding of search. Unlike the theory of myopic search, most research so far has emphasized search initiated by performance relative to aspiration levels on goals that are too broad to justify directing search toward the form of strategic change selected for investigation. In the following, I outline the foundation of an extended theory of problemistic search in response to broad goals through either broad search, use of multiple goals, use of power, reliance on cognitive biases, or responses to environmental stimuli. Each of these processes, alone or in combination, can give more specific predictions of where firms search when encountering performance below aspiration levels on broad goals. Substantial progress in empirical research is needed, however, to distinguish which of these processes occur.