The latent demand for bank debt: characterizing “discouraged borrowers”

Freel, Mark; Carter, Sara; Tagg, Stephen; Mason, Colin

doi:10.1007/s11187-010-9283-6

Cited by 165 publications

(166 citation statements)

References 60 publications

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“…However, the effect of discouragement on the bank financing decisions of SMEs is sought to be statistically insignificant. Contrary to Kon and Storey (2003) and Freel et al (2012), we found that the effect of discouragement on the financing decisions of SMEs is statistically insignificant. It implies that discouragement is irrelevant in explaining the bank loan decisions of SMEs.…”

Section: Resultscontrasting

confidence: 99%

Bank Loan Financing Decisions of Small and Medium-Sized Enterprises: The Significance of Owner/Managers’ Behaviours

Jude¹,

Adamou²

2018

IJEF

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The objective of this study is to highlight the influence of entrepreneurs" behaviour on the decisions to apply for bank loans. A mixed research methodology known as triangulation was employed in order to achieve the objective of the study. Data were sourced from a stratified randomly selected sample of 450 Cameroonian SMEs and analysed using logistic regression. The result of the study revealed that both control aversion and overconfidence behaviours of the owner/managers influence significantly the decisions of SMEs to apply for bank loans. From the result, it is found that behavioural finance theory explains the decisions of SMEs to seek for bank credits. Contrary to the predictions of the pecking order theory, managerial behaviours such as the fear to loss the control of the firm, and overconfidence provide explanations on the decisions of SMEs to seek for bank loans. For instance, the fact that debt does not entail any loss of business control urges SMEs to prefer debt than external equity.

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Section: Resultscontrasting

confidence: 99%

Bank Loan Financing Decisions of Small and Medium-Sized Enterprises: The Significance of Owner/Managers’ Behaviours

Jude¹,

Adamou²

2018

IJEF

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“…(Evropská komise, 2011) Many companies are afraid to ask for a loan because they fear of rejection of an application by a bank. This fact has been observed in smaller fi rms, corporations, serial entrepreneurs, fi rms providing knowledge-intensive services, non-family fi rms, companies without established banking relationships and companies pursuing cost-focused strategy (Freel, Carter, Tagg, Mason, 2012).…”

Section: Introductionmentioning

confidence: 93%

Personal characteristics of entrepreneurs in the context of perception and management of business risk in the SME segment

Kozubíková¹,

Belás²,

Bilan³

et al. 2015

Economics &Amp; Sociology

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Abstract. Th e issue of business in the segment of small and medium-sized companies is a very actual area of scientifi c research today. Currently, great importance is given to research of personal and knowledge preconditions of people for doing business. Th e aim of this article was to examine the relationship between personality characteristics and approach to the perception and management of business risks. Based on the preferred personality qualities and knowledge the entrepreneurs have been included into two categories, namely they are artist-entrepreneurs and businessmen-laborers, also the diff erences in their entrepreneurial attitudes have been examined. Both groups of entrepreneurs in our research rate market risk as the most important risk, which was demonstrated by a decline in performance of companies during the crisis. Our results showed that there are significant diff erences in the attitudes of these two categories of entrepreneurs in approaching credit risk, where it was found out that the defi ned categories of business have diff erent approaches to knowledge of credit conditions of commercial banks. Th e results of our study have showed a high degree of confi dence of individual groups of entrepreneurs when evaluating their ability to manage fi nancial risks in the company and the high intensity of entrepreneurial optimism regardless of the personal characteristics of entrepreneurs.

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“…The application of market failures concepts to the development of rationales for public intervention ensures that such intervention occurs only if there is no adverse impact on private sector activity, in this case the provision of commercial information and advice services" (pages 34-35). Kon and Storey"s (2003) theory of discouraged borrowers highlights potential borrowers from banks who may offer perfectly reasonable business proposals but who "do not apply for a bank loan because they feel they will be rejected" [and more recently considered in studies such as Roper and Scott (2007) and Brooksbank et al (2007) (gender), Fraser (2007 (ethnicity), Wyer et al (2007), and Freel et al (2007)]. We would posit that trust, as described by Bennett and Robson (1999a) -and further developed in Bennett and Robson (2004) -leads to a situation in which there are discouraged advisees.…”

Section: Gender Ethnicitymentioning

confidence: 99%

Discouraged Advisees? The Influence of Gender, Ethnicity, and Education in the Use of Advice and Finance by UK SMEs

Scott

Irwin

2009

Environ Plann C Gov Policy

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Abstract. This paper investigates the influence of gender, ethnicity and education in the use of external advice and finance by UK small and medium-sized enterprises (SMEs). A conceptual model of "discouraged advisees" was developed as a framework for analysis of the results of a telephone survey of 400 SMEs. We found an association between the use of external advice and the ability to raise bank finance. Furthermore, both men and black and minority ethnic (BME) participants were more likely to use family and friends for advice, whilst women were twice as likely as men to use Business Link. BME business owners were discouraged from using less "trusted" sources, such as Business Link, possibly believing them insufficiently tailored or that they would provide inappropriate advice. Therefore, the findings provide support for our conceptual model of discouraged advisees and have implications for the provision of advice for business owners from BME communities.

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The latent demand for bank debt: characterizing “discouraged borrowers”

Cited by 165 publications

References 60 publications

Bank Loan Financing Decisions of Small and Medium-Sized Enterprises: The Significance of Owner/Managers’ Behaviours

Bank Loan Financing Decisions of Small and Medium-Sized Enterprises: The Significance of Owner/Managers’ Behaviours

Personal characteristics of entrepreneurs in the context of perception and management of business risk in the SME segment

Discouraged Advisees? The Influence of Gender, Ethnicity, and Education in the Use of Advice and Finance by UK SMEs

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