Small businesses significantly rely on debt financing. However, it is challenging for them to convince the lenders on their creditworthiness because of the agency problems rooted in information asymmetry. Professionalization, as one of the signal devices, may carry positive information about a small firm since it helps enhance the firm value by aligning owner and managers interests. If firm value goes up, the financial leverage drops without any new external debt financing. Thus, it is safer for the lenders to provide the capital. Unfortunately, whether professionalization helps mitigate the lender-borrower conflict of interest has not been investigated in the previous literature. This study intends to help fill in this gap by investigating the influence of professionalization on small business debt financing. Our empirical results show that professionalization tends to increase the use and the amount of new venture debt financing. Findings also indicate that the solution to owner-manager agency problem can also help alleviate the creditor-shareholder conflict of interests in new venture debt financing.
| Identifer | oai:union.ndltd.org:LACETR/oai:collectionscanada.gc.ca:SSU.etd-05282010-174157 |
| Date | 15 June 2010 |
| Creators | Sun, Li |
| Contributors | Wu, Zhenyu, Cumming, Douglas, Yang, Fan, Wilson, Craig, Racine, Marie |
| Publisher | University of Saskatchewan |
| Source Sets | Library and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada |
| Language | English |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://library.usask.ca/theses/available/etd-05282010-174157/ |
| Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to University of Saskatchewan or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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