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

Based on the marginal effects, the probability of approving additional borrowing increases
with increased value of attitude. This may suggest that respondents with favourable
attitudes tend to endorse additional borrowing. In the same vein, the probability of
approving additional borrowing increases with increased frequency of previous gambling
behaviour. The individual characteristics specified in the model do not have statistically
significant impacts on behavioural intention for model I.

The parameter estimates for model II are presented in table 7. For this model, attitude,
subjective norm, age and income level have statistically significant associations with
behavioural intention. In terms of marginal effects, a unit “increase” in favourable attitude
toward long-term borrowing increases the probability of approving additional borrowing
for business expansion. All other things being equal, a unit increase in the value of

Table 7 Factors Affecting Behavioural Intention to Approve Additional Borrowing to
Finance New Investment When There Are Tax Benefits: Model II (N=30)

Model II: If you were told that higher level of debt leads to higher returns to equity because of tax benefits,
how would it affect your intention to finance proposed expansions using 100% long-term debt?

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.

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