The Role of Non-Managerial Inside Debt in Firm Risk and the Cost of Debt

Linyan Wang, Xiaoxu Sui, Yun Feng, Huijuan Zhang and Bingda Zhang

Emerging Markets Finance and Trade, 2023, vol. 59, issue 9, 3076-3093

Abstract: This study investigates the impact of non-managerial inside debt on managerial risk-taking decisions and the cost of debt. We propose a theoretical model demonstrating that non-managerial inside debt can reduce firm risk by influencing managers’ risk-taking decisions and that non-managerial inside debt is inversely related to the firm’s cost of debt. From the proposed model, we develop an empirical hypothesis that indicates the negative relationship between non-managerial inside debt and the cost of debt. We test the hypothesis empirically and find evidence to support the model. The paper adds a novel theoretical model to the literature that shows the significance of non-managerial inside debt in firm risk-taking and capital raising.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2023.2210717 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:59:y:2023:i:9:p:3076-3093

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2023.2210717

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().