Managers’ Propensity to Take Risk in Project Selection Decisions: the Effect of Payoff Magnitude

Abstract

This paper examines the factors that influence managers’ propensity to take risk in projectselection decision contexts with a special focus on payoff magnitude as an influencing factor.This study utilises an experimental research design to examine this relationship in a projectselection context. The results reveal that there is an inverse relationship between payoffmagnitude and the participants’ propensity to take risk with individuals becoming more riskaverse as the level of payoff magnitude increases. The study also provides an insight into the keyfactors considered by risk averse and risk taking managers when making project selectiondecisions.

Keywords

• Payoff magnitude
• Propensity to take risk
• Project selection.