Economic preferences over risk-taking and corporate finance

Manthos Delis (elmanthos@hotmail.com), Maria Iosifidi, Iftekhar Hasan and Chris Tsoumas

MPRA Paper from University Library of Munich, Germany

Abstract: We contend that economic preferences over risk-taking in different subnational regions worldwide affect fundamental aspects of firms’ corporate financing, namely financing costs and capital structure. We study this hypothesis, by hand-matching firms’ regions worldwide with the corresponding regional economic risk-taking preferences. Our baseline results show that credit and bond pricing increase with higher risk-taking preferences, whereas such preferences yield lower ratios of book leverage and short-term debt. We backup our baseline results with an instrumental variables approach, which is based on the premise that high-yield agricultural societies in the pre-industrial era exhibit low risk-taking preferences.

Keywords: Economic preferences; Risk-taking; Financing costs; Loan spreads; Bond spreads; Capital structure (search for similar items in EconPapers)
JEL-codes: G21 G32 Z13 (search for similar items in EconPapers)
Date: 2021-02-27
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-isf and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:106321

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