Do Decision Makers' Debt-risk Attitudes Affect the Agency Costs of Debt?

Current Agriculture, Food & Resource Issues

G. Hailu, E. W. Goddard and S. R. Jeffrey

Table 6 Factors Affecting Behavioural Intention to Approve Additional Borrowing to
Finance New Investment: Model I (N=30)

Model I: During the next two years I will approve additional borrowing to finance new investments in the
company.

Log likelihood    -48.414

Schwarz B.I.C. 72.222

R²               0.356

A: attitude; SN: subjective norm; PBC: perceived behavioural control; FPB: previous gambling
behaviour; manager = 1, if a manager, 0 otherwise; age old = 1, if age > 54, 0 otherwise; income high
= 1, if income > $100,000, 0 otherwise; and education high = 1, if > high school, 0 otherwise.

Figures in parentheses are t-statistic.

***, **, and * represent 99%, 95% and 90% confidence levels, respectively.

percent replied that they are “inclined to borrow”, whereas 23 percent are “not inclined to
borrow”.

As in the discussion earlier, the behavioural intention variables are based on the
responses to two survey questions: willingness to approve additional borrowing (model I);
tax benefits of debt and intention to borrow (model II⁵). For both models the estimated
threshold parameters have the expected ordering. Positive parameter estimates for the
social-psychological variables and individual characteristics suggest that the likelihood of
intention to approve additional borrowing increases for models I and II.

Table 6 shows parameter estimates for model I. Attitude and frequency of previous
gambling behaviour have statistically significant relationships with behavioural intention.

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