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

business expansion ..., using a 7-point Likert scale response from “very strongly
disagree” to “ very strongly agree”. Each individual’s responses are indexed from -3 to +3
and used as the motivation to comply measure. Individuals are then asked to respond to
another series of statements, such as, Doing what my colleagues think is ..., again using a
7-point Likert scale response from “very unlikely” to “very likely”. Their responses are
indexed numerically from 1 to 7 and used as the normative beliefs measure. The products
of motivation to comply and normative beliefs are summed over all of the statements to
obtain an overall subjective norm index. Table 2 provides a summary of the statements
from the survey and numerically indexed responses for a sample respondent, to illustrate
the method used. In this case, the overall subjective norm index value is -8. This person’s
subjective norm toward increasing borrowing is, then, predicted to be negative.

Table 2 Subjective Norms (Sample Respondent)

To measure perceived behavioural control, individuals are asked to respond to a series
of statements, such as, If I want to have more decision making power I can easily find out,
using a 7-point Likert scale response from “very strongly disagree” to “very strongly
agree”. An individual’s responses are indexed from -3 to +3 and used as the perceived
behavioural facilitation measure. Individuals are then asked to respond to another series
of statements, such as, I could approve long-term debt to finance business expansion more
easily if I had more decision making power, again using a 7-point Likert scale response
from “very unlikely” to “very likely”. The responses are indexed numerically from 1 to 7
and used as the control beliefs measure. The products of perceived behavioural
facilitation and control beliefs are summed over all of the statements to obtain an overall
perceived behavioural control index. Table 3 provides a summary of the statements from
the survey and numerically indexed responses for a sample respondent, to illustrate the
method used. The overall subjective norm index value in this case is -12. This person’s
perceived behavioural control toward increasing borrowing is, then, predicted to be
negative.

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