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      Entrepreneurship and Debt: Growth Aversion, Debt Aversion, Overconfidence, and the Effects on Small Business Credit Decisions

      Bell, Kendon
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      Bell, K. (2012). Entrepreneurship and Debt: Growth Aversion, Debt Aversion, Overconfidence, and the Effects on Small Business Credit Decisions (Thesis, Master of Management Studies (MMS)). University of Waikato, Hamilton, New Zealand. Retrieved from https://hdl.handle.net/10289/7025
      Permanent Research Commons link: https://hdl.handle.net/10289/7025
      Abstract
      Widespread empirical consistency with the pecking order theory of capital structure (Myers & Majluf, 1984) has led researchers to conclude that small and medium sized enterprises conform to this theory’s predictions. In chapter 2, a formal model is presented that allows for plausible and empirically supported psychological owner/manager objectives in addition to the profit motive. This chapter provides an alternative explanation of preferences for low leverage that does not rely on informational asymmetry, as well as predicting limits on firm sizes, and the existence of collateral.

      In chapter 3, a formal model of the entrepreneurship decision with credit is presented for firms with managers who overestimate their probability of success. Explanations for credit rationing, predatory lending, and the existence of collateral are produced and the welfare implications of overconfidence are investigated in an equilibrium model. It is found that overconfidence can increase overall welfare but harms entrepreneurs who are able to engage in poor projects.
      Date
      2012
      Type
      Thesis
      Degree Name
      Master of Management Studies (MMS)
      Supervisors
      Tressler, John
      Publisher
      University of Waikato
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      All items in Research Commons are provided for private study and research purposes and are protected by copyright with all rights reserved unless otherwise indicated.
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      • Masters Degree Theses [2381]
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