What affects what and what affects that? : A quantitative study on risk and uncertainty’s influence on change in strategic decision making and the moderating role of corporate governance mechanisms.

Abstract: Background: Risk and uncertainty as a concept resides in unknown results and uncertainties with the ability of affecting firms. With its ability to affect, comes the necessity for firms to adapt in its corporate strategic decision making. Corporate governance in its broad terms has been shown to impact strategic decision making. As the factors affecting it are not unanimous among prior literature, corporate governance mechanisms' relationship to risk is therefore relevant to examine in order to create a deeper understanding within the subject. Purpose: This paper aims to explain the relationship between strategic decision making with risk and uncertainty as well as the influence on this relationship from corporate governance mechanisms. Additionally, by studying these relationships in a Swedish context, we aim to build upon existing literature of corporate governance. Method: This study uses a positivist deductive approach using a quantitative strategy to investigate the risk-strategic relationship and the influence of corporate governance mechanisms. The study uses a research setting of Swedish firms listed at least one year on the large cap list on Stockholm stock exchange. The data was collected through financial and non-financial databases and annual reports. The data was analyzed using statistical tests. Findings: Change in R&D, capital structure, and employees are all impacted by risk and uncertainty, but change in dividends, intangible assets, and internationalization are unaffected. Risk-strategic connections are influenced by corporate governance mechanisms, but the effect of board independence is negligible. CEO age and gender impact, but not compensation. Identity of ownership matters, however not the concentration.