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

behaviour, the subjective norm and perceived behavioural control. Attitude is the
individual’s feeling and belief about the behaviour. Subjective norm refers to approval of
a person’s important referents with regard to the consequences of performing the
behaviour or not. Perceived behavioural control refers to the degree to which a person
feels that his or her performance or non-performance of the behaviour is under his or her
control (Ajzen, 1991). Perceived behavioural control is hypothesized to have an impact on
both the intention to perform the behaviour and the behaviour per se.

Empirically, attitudes toward actions (e.g., debt leveraging) are determined by and can
be measured as the sum of evaluative salient behavioural belief, where behavioural beliefs
are beliefs held about the consequences of the action in question. The basic form of the
Fishbein multi-attribute attitude model can be expressed as
n

(1)      Aj=У bijai,

i=1

where Aj is an individual’s attitude toward an object j (e.g., debt leveraging); bij is the
individual’s belief, expressed as a subjective probability that object
j is associated with
some attribute
i; ai is the evaluative aspect (i.e., judged goodness or badness) of attribute i;
and
n is the number of salient beliefs. Equation (1) represents a model of attribute
measurement wherein the strengths of an individual’s beliefs about particular attributes
are weighted and summed to yield an index of overall attitude. It is assumed that a
person’s attitude toward the behaviour is proportional
() to this summative index (Ajzen,
1991).

Subjective norm (SN) is obtained by summing the products of the strength for each
normative belief (
NBi) and the motivation to comply (MCi) with the referent in question,
over the
m normative beliefs. Normative belief is a belief about what a specific referent
person thinks one should or should not do regarding borrowing. Individuals who believe
that most referents with whom they are motivated to comply think they should endorse
borrowing will perceive social pressure to do so. It is assumed that a person’s subjective
norm is proportional (
^) to the resulting summative index. Thus, subjective norm can be
expressed as

(2) SN = ∑NBMC.

i=1

where NBi is the DM’s normative belief that the salient reference thinks he or she should
(or should not) perform the behaviour and
MCi is the DM’s motivation to comply with
that referent (Ajzen and Fishbein, 1980).

To obtain a measure of perceived behavioural control (PBC) each control belief (CBk,
the assessment as to whether or not a given control factor - e.g., decision making power -
makes it harder or easier to endorse additional borrowing) is multiplied by perceived
behavioural facilitation (
PFk, the assessment of the strength of the given control factor -
e.g., decision making power - in actually affecting borrowing) of the particular control
factor to facilitate or inhibit performance of behaviour, and the resulting products are

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