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Determinants of Small Business Owner Loan

Jiameng Ma(School of Management, Shanghai University)


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.


National Survey of Small Business Finance (NSSBF);Shareholders;Debtholders

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