This research empirically tests for the strategic risk-return correlation and the determining factors of strategic risk in China. In this paper, the authors select listed companies in the electric power industry in China as the research sample and adopt a dynamic time series model including aspirations, expectations, industry performance, corporate performance and risk. The empirical findings indicate that aspirations and expectations both have a positive impact on risk taking, while enterprise performance and previous risk have a negative impact on risk taking. It supports Behavioral Theory in the Firm’s thesis about the causal relationship between strategic risk and return, namely low performance-high risk. A firm with low performance will seek greater risk and a firm with high performance will try to keep low risk. Bowman’s paradox also applies to China’s enterprises.