Government decentralization and disaster impact, an exploratory study

The purpose of this study is to explore the link between decentralization and the impact of natural disasters through empirical analysis. It addresses the issue of the importance of the role of local government in disaster response through different means of decentralization. By studying data available for 50 countries, it allows to develop the knowledge on the role of national government in setting policy that allows flexibility and decision making at a local level and how this devolution of power influences the outcome of disasters. The study uses Aaron Schneider’s definition and rankings of decentralization, the EM-DAT database to identify the amount of people affected by disasters on average per year as well as World Bank Indicators and the Human Development Index (HDI) to model the role of local decentralization in mitigating disasters. With a multivariate regression it looks at the amount of affected people as explained by fiscal, administrative and political decentralization, government expenses, percentage of urbanization, total population, population density, the HDI and the overall Logistics Performance Indicator (LPI). The main results are that total population, the overall LPI and fiscal decentralization are all significant in relation to the amount of people affected by disasters for the countries and period studied. These findings have implication for government’s policies by indicating that fiscal decentralization by allowing local governments to control a bigger proportion of the countries revenues and expenditures plays a role in reducing the amount of affected people in disasters. This can be explained by the fact that local government understand their own needs better in both disaster prevention and response which helps in taking the proper decisions to mitigate the amount of people affected in a disaster. The reduction in the implication of national government might also play a role in reducing the time of reaction to face a disaster. The main conclusion of this study is that fiscal control by local governments can help reduce the amount of people affected by disasters.

Agency theory and the family business

The conceptual domain of agency theory is one of the dominant organisational theory perspectives applied in current family business research (Chrisman et al., 2010). According to agency theory (Jensen and Meckling, 1976), agency costs generally arise due to individuals’ selfinterest and decision making based on rational thinking and oriented toward own preferences. With more people involved in decision making, such as through the separation of ownership and management, agency costs occur due to different preferences and information asymmetries between the owner (principal) and the employed management (agent) (Jensen and Meckling, 1976). In other words, agents take decisions based on their individual preferences (for example, short term, financial gains) instead of the owners’ preferences (for example, long term, sustainable development).

Behavioural agency theory and the family business

The behavioural agency theory was developed to provide a more comprehensive explanation and prediction of managerial risk taking, in response to some shortcomings of agency theory. In general, the theory offers explanations of why decision makers prefer some strategic choices to others. The use of behavioural agency theory in family business research has, however, been very limited. Family business scholars recently adapted this theory to construct the family business variant, the ‘socioemotional wealth’ construct, which offers better explanations for the risk taking and decision making behaviours of family firms. This chapter provides an overview of behavioural agency theory and the socioemotional wealth construct, explores how they have been used in family business research, and offers suggestions for how this theory can be used in further research to contribute to both the family business and the general management literature. Keywords: family business, behavioural agency theory, socioemotional wealth, family firm heterogeneity.