Influence of Financial Slack on Risk-Taking Behavior for Family Firms (Analysis Paper)

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Critical Analysis of the Methodology

The researchers used empirical data drawn from firms’ surveys, private organizations, and government databases with a focus on the firms’ ownership structures, management procedures, growth, and topics on strategic development. The researchers found these source important because it was easier to determine the effects of a range of external factors on the dependent variable (family risk-taking behavior). It was, however, difficult to control data variability since there were several outliers and this, to some level, compromised the validity of the information presented by these sources. Therefore, the method of investigation is criticized following the large variations in family firms’ performances, which indicates that business actors are more than willing to pursue new business opportunities with the objectives of increasing performance outcomes. However, other researchers such as Gómez-Mejía et al. (2007) used secondary data stored by olive oil firms. Information relating to the performance of family firms and other business agencies were retrieved from government official registries. The researchers found this source credible because the registries are updated annually with the correct information on both private and public business performances. However, the researchers did not find adequate information because the source did not give details of percentage ownership by individuals. Following these limitations, it would have been more prudent for the researchers to engage in primary investigations, seek the opinions of business owners, and engage in both quantitative and analysis of the information given by the respondents. Survey questions would have been developed based on the objectives of the study and sent to individual firm for investigation.

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Gaps in Research

In summary, the literature findings revolve around three important theories; agency theory, prospect theory, and behavioral agency model (Wiseman, & Gomez-Mejia, 1998). It is, however, clear from the literature analysis that the majority of the researchers used the behavioral agency model to explain the influence of financial slack on the risk-related behavior of family firms. Following the behavioral agency model, we can conclude that financial slack is a problem of internal corporate governance and can be used to explain the risk-taking behavior of executive managers and business owners. The authors have successfully demonstrated that financial management and risk-taking behaviors vary across family businesses and this could be one of the reasons why risk-taking behaviors and monitoring approaches vary across family businesses. The only gap identified during literature analysis is that the studies did not develop precise propositions that can be used to combine monitoring with the financial performance so that there is the easy framing of strategic challenges. As a matter of fact, family firms should explain their choices of strategic risks. In this study, therefore, it will be necessary to use the available pieces of evidence in developing propositions for combining monitoring with financial performance. Through such propositions, it will be easier for family firms to enhance and extend their operational base so that there is an opportunity for improved risk management.

Apart from financial slack, business owners and managers must recognize other factors that affect risk management decisions because they may also have significant effects on future performances.  For instance, GomezMejia, Makri, and Kintana (2010) found out that a factor such as diversification decision of owners and managers demonstrate that SMEs fear to diversify their operations locally and internationally compared to non-family managed firms because of their lack appropriate strategies for diversification. This argument is different because it does not touch on financial slack or any challenge relating to financial slack. It is also evident from the authors’ point of view that those firms that have succeeded in diversifying their business activities mostly opt for domestic market with less regional operations. Unlike in the case of financial slack, it becomes clear that most family businesses prefer to diversify in situations where there is an increase in business risk.


According to “behavioral theorists,” owners and managers can use past financial performances of family firms to examine both the short-term and long-terms performance expectations. Where a family firm is satisfied with the past financial performance, there is a tendency to remain risk averse and enhance current business activities with the goals of improving future outcomes. The ideas presented by “behavioral theorists” find support from “strategic reference points theorists” who hold the view that heterogeneity in financial risk aversion is the only way family firms can ensure positive influence on future business outcomes. However, strategic reference theorists present contrary opinions regarding the risk-related behavior of family firms and future performance expectations. According to these theorists, strategic roles of business owners and managers can have significant effects on the family firms’ entrepreneurial behaviors and risk management approaches. Moreover, exclusive ownership seems to have a positive association with owners’ preference for business activities; an effect that can be used to determine family response behavior towards hazardous business conditions.


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Theorizing the Motive of Crime: Administrative Behavior (Essay Sample)

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This sample was written by experienced writers from best custom essay writing service – customessayorder.com. Feel free to use it for your needs.

Turvey (2011) defines motive as “the emotional, psychological, and material needs that impel and are satisfied by behavior” (p. 276). This means that offenders do not commit crimes just for the sake of it, but to achieve a specific goal that is self-benefiting. Theft, for instance, is usually, and correctly so, linked to the desire for financial gain, which is a powerful motive for a jobless, uneducated city dweller. Rational Choice Theory gives further insight into the essence of motive by stating that potential offenders make rational choices on the basis of their analysis of the costs and benefits associated with the crime. If the benefits personal gain) outweighs the cost (risk of being caught), the offender proceeds with the crime. For instance, a bank robber realizes that he or she will be taking a big risk trying to steal from a facility with advanced security systems- the risk of getting caught, identified through security cameras, or failing to access the money, is very high. If successful, however, he or she will make a way with a fortune. It is the possibility of making a big financial gain that is usually the motivation behind theft-related crimes. In light of the strong link between personal gain and motive, the best method for interpreting motive is one that takes into account the factors and behaviors associated with personal gain. Accordingly, I consider administrative behavior as the most effective method for interpreting motive for crime.

Administrative behavior model suggests that offenders are often motivated by financial, material, or personal gain.  This method provides a comprehensive approach for considering all the possible motivational drives for crime. The three elements of financial, material, or personal gain covers nearly every possible motivation for crime, except on those associated with psychological needs such as revenge or sexual satisfaction.

Administrative behavior provides an accurate assessment of motivational factors because it takes into account the rational nature of most crimes. The approach dispels the myth that most offenders are maniac, thoughtless psychos who are driven by impulse. Even in impulsive cases, such as psychopathic serial killers who are motivated by the sense of power associated with being in control of another person’s life, there is logical calculations in the way the offender identifies a potential victim, stalks the victim, and maps out where, when, and how to attack. In this regard, the administrative behavior model allows investigators to rule out or accept motivational factors through a rational analysis of the various factors that can push an offender to commit a crime, as well as the logical satisfaction that the offender would seek to achieve from the crime.

The administrative behavior model is also effective because it takes into account the reality of offenders. It focuses on real life situations that drive individuals to commit crime. For example, the elements of material and financial gain reflect the circumstances under which white collar crime, kidnappings, mugging, burglaries, robberies, and all forms of theft crimes occur. In addition to considering the totality of the circumstances surrounding a crime to determine motive, the model places emphasis on understanding the life circumstances of the offender to establish possible financial or personal problems that could have acted as motivation for the crime. A classic scenario in white collar crime is that of a lowly-paid clerk with mortgage, bank loan and college fees burdens. These factors present strong cause factors to make one engage in white collar crime to make meets end. In considering the life circumstances of a suspect, such as lifestyles, administrative behavior perspectives can help to link a crime to habits that are not directly related to the commission of a crime, but provide personal satisfaction for which the offender needs money to attain. Good examples include gambling and drug addiction, which are themselves not motives, but are sources of personal satisfaction which the offender can achieve by stealing money. Such factors have been linked to white collar crimes like embezzlement, forgery and fraud (Albanese, 2008, p. 334). Accordingly, administrative behavior does not merely associated motive for theft with simply being broke- most fraud cases are committed by high-paid executives- but also considering personal behaviors and habits that can act as a psychological push into committing crime.  

In conclusion, motivation refers to the emotional, psychological and material needs that encourage and are satisfied by a behavior. In determining the nature and cause of motive, crime investigators adopt different approaches, which have their own strengths and weaknesses. An effective method, however, should provide criteria for identifying the motivation for a wide selection of crimes. The method’s wide application makes it a useful tool for crime investigators for qualifying and disqualifying potential suspects. Towards this goal, the administrative behavior model is an effective tool for interpreting behavior because it covers a wide range of crimes, as well as takes into account the circumstances surrounding a crime. In addition, it goes beyond the immediate circumstances of a crime by seeking to find motive in the suspect’s lifestyles and habits. In this regard, the model provides a through and comprehensive approach for interpreting motive.


Albanese, J. S. (2008). White collar crimes and casino gambling: looking for empirical links to

forgery, embezzlement, and fraud. Journal of Crime, Law and Social Change, 49(5), 333-347.

Turvey, B. (2011). Criminal profiling: An introduction to behavioral evidence analysis (4th ed.).

Burlington, MA: Elsevier.

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