The Effect of Risk Knowledge and Risk Bearing Towards the Investment Decisions Through Risk Preference and Risk Composure

Abstract: Objective: This study aimed to investigate the influence of risk knowledge and risk bearing on investment decisions for infrastructure projects carried out by State-Owned Enterprises (SOEs) in Indonesia. Based on behav- ioural decision theory, this study applied the mediator variables, risk preference and risk composure, to scrutinize the influence of risk knowledge and risk bearing. Design/Method/Approach: Studies were performed in 101 state-owned enterprises and their subsidiaries in Indone- sia, and the data were analyzed using partial least squares structural equation modelling testing. Findings: Risk preference and composure could mediate improving the impact of risk knowledge and risk bearing on investment decisions. In addition, this study also revealed that the risk preference was more significant than risk composure as a mediator. Practical Implications: The high financial knowledge and risk management capability of SOE management can mit- igate these risks to minimize losses arising from each investment that has been allocated and support from the com- pany owner. Then, the role of risk-bearing has a greater indirect influence on investment decisions than the role of risk knowledge, where management is ready to bear the financial risk of the investment that will occur. Originality/Value: Risk preference and composure mediate the behavioural decision theory approach, a construct model with a new conceptual research model to influence risk knowledge and risk bearing on investment decisions in alignment with SDG 8. In addition, the partial mediation effect only occurs from the risk-bearing variable as an antecedent.