Determinants of Small Business Owner Loan

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.

Employee Inside Debt and Firm Risk-Taking: Evidence from Employee Deposit Programs in Japan

Unlike broad-based equity ownership by employees, ownership of company debt by rank-and-file employees has not received much attention. We argue that company debt held by employees in the form of in-company deposits can monitor risk-taking and facilitate risk discovery. Employee deposits have been historically widely used in Japan. For a sample of 2,104 Japanese firms, using an identification strategy that utilizes a new law in 2003 that changed the priority of employee deposits in bankruptcy and led to large-scale withdrawals of employee deposits, we find that employee deposits mitigate firms’ risk-taking behavior and reduce the agency cost of debt. Received November 2, 2018; editorial decision May 1, 2019 by Editor Andrew Ellul. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Does a high dividend payout ratio signal proper corporate governance or high agency cost of debt?

This paper examines the relationship between dividend policy and the cost of debt in Morocco. The results show that high dividend payments reflect a low level of agency costs of equity and low information asymmetries. Consequently, creditors demand lower return for providing their capital to high dividend-paying firms. The findings reveal that creditors are less concerned with agency costs of debt. The study shows that the negative relationship between dividend payout ratios and cost of debt is more pronounced in firms with higher information asymmetries.