 The innovation debt penalty: Cost of debt, loan default, and the effects of a public loan guarantee on high-tech firmsMarc Cowling, Elisa Ughetto and Neil Lee Technological Forecasting and Social Change, 2018, vol. 127, issue C, 166-176 Abstract: High-technology firms per se are perceived to be more risky than other, more conventional, firms. It follows that financial institutions will take this into account when designing loan contracts, and that this will manifest itself in more costly debt. In this paper we empirically test whether the provision of a government loan guarantee fundamentally changes the way lenders price debt to high-tech firms. Further, we also examine whether there are differential loan price effects of a public guarantee depending on the nature of the firms themselves and the nature of the economic and innovation environment that surrounds them. Using a large UK dataset of 29,266 guarantee backed loans we find that there is a high-tech risk premium which is justified by higher default, but, in general, that this premium is altered significantly when a public guarantee is provided for all firms. Further, all these loan price effects differ on precise spatial economic and innovation attributes. Keywords: Cost of debt; High tech firms; Public loan guarantee scheme; Loan default (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:127:y:2018:i:c:p:166-176 DOI: 10.1016/j.techfore.2017.06.016 Access Statistics for this article Technological Forecasting and Social Change is currently edited by Fred Phillips More articles in Technological Forecasting and Social Change from Elsevier |
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