Determinants of Small Business Owner Loan
Abstract
Shareholders and debtholders have diverging objectives. Shareholders are residual claimants whereas debtholders are fxed claimants to frm’s assets. In leveraged frms, shareholders may increase the value of their claims at the expense of debtholders. The presence of shareholders being debtholders is a smart interest alignment, providing a solution to shareholder-debtholder conflicts. This paper focuses on small businesses, which play an important role in the United States economy but are generally neglected by academia. Utilizing National Survey of Small Business Finance (NSSBF) data, this paper shows that frms with higher agency cost of debt are more likely to issue owner loan. The incidence of small business owner loan is positively associated with external lending diffculty, low shareholder agency cost and frm valuation diffculty.
Keywords
Full Text:
PDFReferences
Jensen, Michael and William Meckling, 1976, Theory of the frm: Managerial behavior, agency costs and ownership structure, Journal of Financial Economics 3, 305-360.
Myers, Stuart, 1977, The determinants of corporate borrowing, Journal of Financial Economics 5, 147-175.
Smith, Clifford, and Jerold Warner, 1979, On financial contracting: An analysis of bond covenants, Journal of Financial Economics 7, 117-161.
Chen, Feng, Yiwei Dou, and Xin Wang, 2010, Executive inside debt holdings and creditors’ demand for pricing and non-pricing protections, Working paper.
Wang, Cong, Fei Xie, Xiangang Xin, 2010, Managerial ownership of debt and bank loan contracting,Working Paper.
Edmans, Alex, and Qi Liu, 2011, Inside Debt, Review of Finance 15, 75-102.
Kabir, Rezaul, Hao Li, and Yulia Veld-Merkoulova, 2013, Executive compensation and the cost of debt, Journal of Banking & Finance 3, 2893-2907.
Sengupta, Partha, 1998, Corporate disclosure quality and the cost of debt, The Accounting Review 73,459-474.
Sundaram, Rangarajan, and David Yermack, 2007, Pay me later: Inside debt and its role in managerial compensation, Journal of Finance 62, 1551-1588.
Wittenberg-Moerman, Regina, 2008, The role of information asymmetry and fnancial reporting quality in debt trading: Evidence from the secondary loan market, Journal of Accounting and Economics 46,240-260.
Cassell, Cory, Shawn Huang, Juan Manuel Sanchez, and Michael Stuart, 2012, Seeking safety: The relation between CEO inside debt holdings and the riskiness of firm investment and financial policies, Journal of Financial Economics 103, 588-610.
Dasgupta, Sudipto, Yupeng Lin, Takeshi Yamada, and Zilong Zhang, 2013, Employee inside debt and firm risk-taking: Evidence from employee deposit programs in Japan, Working paper.
White, Reilly, 2012, Inside debt and firm dividend policy, Working paper.
Jiang, Wei, Kai Li, and Pei Shao, 2010, When shareholders are creditors: Effects of the simultaneous holding of equity and debt by institutional investors, Review of Financial Studies 23, 3595-3637.
Allee, Kristian, Teri Lombardi Yohn, 2009, The demand for financial statements in an unregulated environment: An examination of the production and use of financial statements by privately held small businesses, The Accounting Review 84, 1-25.
Ang, James, Rebel Cole, James Wuh Lin, 2000, Agency costs and ownership structure, The Journal of Finance 55, 81-106.
James, Christopher and Peggy Wier, 1990, Borrowing relationships, intermediation, and the cost of issuing public securities, Journal of Financial Economics 28, 149-171.
Petersen, Mitchell, Raghuram Rajan, 1994, The benefits of lending relationships: Evidence from small business data, The Journal of Finance 49, 3-37.
Petersen, Mitchell, Raghuram Rajan, 1995, The effect of credit market competition on lending relationships. The Quarterly Journal of Economics 110, 407-443.
Petersen, Mitchell, Raghuram Rajan, 2002, Does distance still matter? The information revolution in small business lending, The Journal of Finance 57,2533-2570.
DOI: http://dx.doi.org/10.26549/jfr.v3i2.2174
Refbacks
- There are currently no refbacks.
![Creative Commons License](http://licensebuttons.net/l/by-nc/4.0/88x31.png)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.