Impact of Financial Characteristics on Future Corporate Risk-Taking Behavior

The purpose of this study is to invoke prospect theory to construct an empirical framework to predict idiosyncratic risk, and argue that when a firm performs better than its benchmarks, the firm tends to play safe by avoiding firm-specific risk to maintain its satisfactory performance level, but when a firm performs worse than its benchmarks, the firm may become aggressive with taking more risks to achieve an increased level of performance. the purpose of this study is to investigate the effect of financial characteristics on future corporate risk taking behavior. after designing the indicators for assessing financial characteristics, the transaction data were collected from the stock exchange in the five-year period of 2011-2015. a sample of 111 companies was selected by sampling method based on the cochran formula, which resulted in a total of 555 year-firm observations. in this study, linear regression and correlation were used to investigate the hypothesis, and for analyzing data and hypothesis testing, we used eviews software. what can be said in the summing-up and conclusion of the general test of research hypotheses is that the disproportionate changes in sales costs, advertising costs, rental costs, liquidity, financial leverage, and disproportionate changes in capital costs have a positive impact on future corporate risk taking behavior. in addition, other results indicate a negative impact of disproportionate changes in sales growth, inventory, liquidity, and asset turnover on future corporate risk-taking behavior.