Size |
Natural Logarithm of Total Assets of firm at t. |
Zahra 2005Zahra, S. A. (2005). Entrepreneurial risk taking in family firms. Family Business Review, 18(1), 23-40. ; Chrisman & Patel, 2012Chrisman, J. & Patel, P. (2012). Variations in R&D investments of family and nonfamily firms: behavioral agency and myopic loss aversion perspectives. The Academy of Management Journal, 55(4), 976-997.; Vancin & Procianoy, 2016Vancin, D. F.; Procianoy, J. L. (2016). Os fatores determinantes do pagamento de dividendos: o efeito do obrigatório mínimo legal e contratual nas empresas brasileiras. Revista Brasileira de Finanças, 14(1), 89-123. . |
The larger the firm, the more likely it is to resist change and innovation. |
Performance |
Ratio between net income and equity. |
Zahra, 2005Zahra, S. A. (2005). Entrepreneurial risk taking in family firms. Family Business Review, 18(1), 23-40. ; Faccio, Marchica, & Mura, 2011Faccio, M.; Marchica, M.-T.; Mura, R. (2011). Large shareholder diversification and corporate risk-taking. The Review of Financial Studies, 24(11), 3601-3641.. |
A recent successful track record would inhibit managers from pursuing risky entrepreneurial activities given their satisfaction with the firm’s situation. |
Board |
Number of board members. |
Goodstein, Gautam, & Boeker, 1994Goodstein, J., Gautam, K., & Boeker, W. (1994). The effects of board size and diversity on strategic change. Strategic management journal, 15(3), 241-250. e Zahra et al., 2004Zahra, S. A.; Hayton, J. C.; Salvato, C. (2004). Entrepreneurship in family vs. non-family firms: A resource-based analysis of the effect of organizational culture. Entrepreneurship theory and Practice, 28(4), 363-381. . |
It is considered more difficult to make risky decisions when the quorum that decide is higher. |
External |
Ratio between the number of external directors and the existing total. |
Anderson & Reeb, 2003Anderson, R. C.; Reeb, D. M. (2003) Founding-family ownership and firm performance: evidence from the s&p 500. The Journal Of Finance, 58(3), 1301-1328. e Chen & Hsu, 2009Chen, H.-L. & Hsu, W.-T. (2009) Family ownership, board independence, and r&d investment. Family Business Review, 22(4), 347-362.
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This feature influences how much management is monitored and allows the inclusion of views of members outside the firm’s routine. |
Opportunities |
Sum of market value and debt divided by total assets. |
Smith & Stulz, 1985Smith, C. W., & Stulz, R. M. (1985). The determinants of firms’ hedging policies. Journal of financial and quantitative analysis, 20(4), 391-405.; Kammler & Alves, 2009Kammler, E. L., & Alves, T. W. (2009). Análise da capacidade explicativa do investimento pelo q de Tobin em empresas brasileiras de capital aberto. RAE eletrônica, 8(2). http://dx.doi.org/10.1590/S1676-56482009000200007
http://dx.doi.org/10.1590/S1676-56482009...
e Belkhir & Chazi, 2010Belkhir, M., & Chazi, A. (2010). Compensation vega, deregulation, and risk‐taking: Lessons from the US banking industry. Journal of Business Finance & Accounting, 37(9‐10), 1218-1247.. |
The more investment opportunities, the more the firm would tend to get involved with new projects and would be backed by risk-taking. |
Liquidity |
Cash Flow divided by Total Assets. |
Chen & Hsu, 2009Chen, H.-L. & Hsu, W.-T. (2009) Family ownership, board independence, and r&d investment. Family Business Review, 22(4), 347-362.; Muñoz-Bullón & Sanchez-Bueno, 2011Muñoz-Bullón, F., & Sanchez-Bueno, M. J. (2011). The Impact of Family Involvement on the R&D Intensity of Publicly Traded Firms. Family Business Review, 24(1), 62–70.. |
It is expected that the more liquidity the firm has, the more predisposed it will be to take risks, and vice versa. |
Age |
Number of years since foundation. |
Dickinson, 2011Dickinson, V. (2011). Cash flow patterns as a proxy for firm life cycle. The Accounting Review, 86(6), 1969-1994. e Faccio, Marchica & Mura, 2011Faccio, M.; Marchica, M.-T.; Mura, R. (2011). Large shareholder diversification and corporate risk-taking. The Review of Financial Studies, 24(11), 3601-3641.. |
The risk-taking level is expected to decrease with the firm’s age. |
Return |
Share price in t divided by the price in t-1 minus one. |
Kuang & Qin, 2013Kuang, Y. F.; Qin, B. (2013). Credit ratings and CEO risk-taking incentives. Contemporary Accounting Research, 30(4), 1524-1559. e Elsilä, 2015Elsilä, A. (2015). Trade Credit Risk Management: The Role of Executive Risk‐Taking Incentives. Journal of Business Finance & Accounting, 42, 1188-1215.
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Higher risk companies, on average, should have higher returns. |