Abstract
Using multinomial logit methodology for financing application decisions for bank loans, credit lines and trade credits, we show that firms’ financial behavior is driven by their lagged experience. Moreover, the optimism and pessimism of firms (animal spirit) is another important determinant. Our results stress the importance of the behavioral perspective to corporate finance. The policy of quantitative easing of the ECB had only weak effects on the access to banking loans, while it was significantly correlated with lower internal funding. Our results have possible implications to understand the behavioral dynamics of corporate financing structure the in the post pandemic period.
Funding source: Grantová Agentura České Republiky
Award Identifier / Grant number: Grant No. 23-07983S “Corporate social behavior a
Acknowledgment
We appreciate comments from Paul De Grauwe, Fabian Reck, Ronja Lind, Gábor Kutasi, Carolina Rachel, Daniel Fidrmuc, Svatopluk Kapounek, Zuzana Kučerová, and Christa Hainz. We appreciate funding by the Czech Science Foundation via grant No. 23-07983S “Corporate social behavior and responses to CSR policies, institutions, and economic distress.”
References
Akerlof, G. A., and R. J. Shiller. 2009. Animal Spirits. How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism. Princeton: Princeton University Press.10.2307/j.ctv36mk90zSearch in Google Scholar
Allini, A., S. Rakha, D. G. McMillan, and A. Caldarelli. 2018. “Pecking Order and Market Timing Theory in Emerging Markets: The Case of Egyptian Firms.” Research in International Business and Finance 44: 297–308. https://doi.org/10.1016/j.ribaf.2017.07.098.Search in Google Scholar
Andrieu, G., R. Staglianò, and P. van der Zwan. 2018. “Bank Debt and Trade Credit for SMEs in Europe: Firm-Industry-And Country-Level Determinants.” Small Business Economics 51 (1): 245–64. https://doi.org/10.1007/s11187-017-9926-y.Search in Google Scholar
Artola, C., and V. Genre. 2011. “Euro Area SMEs Under Financial Constraints: Belief or Reality?” CESifo working papers: No. 3650. Munich: CESifo.10.2139/ssrn.1966955Search in Google Scholar
Arzubiaga, U., A. De Massis, A. Maseda, and T. Iturralde. 2023. “The Influence of Family Firm Image on Access to Financial Resources in Family SMEs: A Signaling Theory Perspective.” Review of Managerial Science 17 (1): 233–58. https://doi.org/10.1007/s11846-021-00516-2.Search in Google Scholar
Baker, M., and J. Wurgler. 2002. “Market Timing and Capital Structure.” The Journal of Finance 57 (1): 1–32. https://doi.org/10.1111/1540-6261.00414.Search in Google Scholar
Balaz, V. 2021. “Attitudes Towards Financial Risks and Portfolio Allocations: Evidence from Large-Scale Surveys.” Ekonomicky Casopis – Journal of Economics 69 (2): 113–34. https://doi.org/10.31577/ekoncas.2021.02.01.Search in Google Scholar
Beaudry, P., and T. Willems. 2022. “On the Macroeconomic Consequences of Over-Optimism.” American Economic Journal: Macroeconomics 14 (1): 38–59. https://doi.org/10.1257/mac.20190332.Search in Google Scholar
Bellemare, M. F., T. Masaki, and T. B. Pepinsky. 2015. “Lagged Explanatory Variables and the Estimation of Causal Effects.” Journal of Politics 79 (3): 949–63.10.1086/690946Search in Google Scholar
Bernanke, B. S. 2020. “The New Tools of Monetary Policy.” The American Economic Review 110 (4): 943–83. https://doi.org/10.1257/aer.110.4.943.Search in Google Scholar
Bolton, P., H. Chen, and N. Wang. 2013. “Market Timing, Investment, and Risk Management.” Journal of Financial Economics 109 (1): 40–62. https://doi.org/10.1016/j.jfineco.2013.02.006.Search in Google Scholar
Bouwman, C. H. S. 2014. “Managerial Optimism and Earnings Smoothing.” Journal of Banking & Finance 41 (C): 283–303. https://doi.org/10.1016/j.jbankfin.2013.12.019.Search in Google Scholar
Brander, J. A., and B. J. Spencer. 1989. “Moral Hazard and Limited Liability: Implications for the Theory of the Firm.” International Economic Review 30: 833–49. https://doi.org/10.2307/2526754.Search in Google Scholar
Brendea, G., F. Pop, and L. Mihalca. 2022. “Capital Structure and Firm Performance: The Case of Central and Eastern European Economies.” Ekonomicky Casopis – Journal of Economics 70 (5): 430–49. https://doi.org/10.31577/ekoncas.2022.05.03.Search in Google Scholar
Canton, E., I. Grilo, J. Monteagudo, and P. van der Zwan. 2013. “Perceived Credit Constraints in the European Union.” Small Business Economics 41 (3): 701–15. https://doi.org/10.1007/s11187-012-9451-y.Search in Google Scholar
Castaldo, A., G. De Luca, and B. Barile. 2021. “Does Initial Access to Bank Loans Predict Start‐Ups’ Future Default Probability? Evidence from Italy.” Contemporary Economic Policy 39 (1): 83–106. https://doi.org/10.1111/coep.12480.Search in Google Scholar
Cavallo, A., G. Cruces, and R. Perez-Truglia. 2017. “Inflation Expectations, Learning, and Supermarket Prices: Evidence from Survey Experiments.” American Economic Journal: Macroeconomics 9 (3): 1–35. https://doi.org/10.1257/mac.20150147.Search in Google Scholar
Coibion, O., Y. Gorodnichenko, and S. Kumar. 2018. “How Do Firms Form Their Expectations? New Survey Evidence.” The American Economic Review 108 (9): 2671–713. https://doi.org/10.1257/aer.20151299.Search in Google Scholar
Cosmides, L., and J. Tooby. 1994. “Better than Rational: Evolutionary Psychology and the Invisible Hand.” The American Economic Review 84 (2): 327–32.Search in Google Scholar
Danieli, L., and P. Jakubik. 2022. “Early Warning System for the European Insurance Sector.” Ekonomicky Casopis – Journal of Economics 70 (1): 3–21. https://doi.org/10.31577/ekoncas.2022.01.01.Search in Google Scholar
Danielson, M. G., and J. A. Scott. 2004. “Bank Loan Availability and Trade Credit Demand.” Financial Review 39 (4): 579–600. https://doi.org/10.1111/j.0732-8516.2004.00089.x.Search in Google Scholar
Das, S., C. M. Kuhnen, and S. Nagel. 2020. “Socioeconomic Status and Macroeconomic Expectations.” Review of Financial Studies 33 (1): 395–432. https://doi.org/10.1093/rfs/hhz041.Search in Google Scholar
DeAngelo, H., L. DeAngelo, and T. M. Whited. 2011. “Capital Structure Dynamics and Transitory Debt.” Journal of Financial Economics 99 (2): 235–61. https://doi.org/10.1016/j.jfineco.2010.09.005.Search in Google Scholar
De Bondt, W. F., and R. H. Thaler. 1995. “Financial Decision-Making in Markets and Firms: A Behavioral Perspective.” Handbooks in Operations Research and Management Science 9: 385–410.10.1016/S0927-0507(05)80057-XSearch in Google Scholar
De Grauwe, P., and Y. Ji. 2018. “Behavioural Economics is Useful Also in Macroeconomics: The Role of Animal Spirits.” Comparative Economic Studies 60 (2): 203–16. https://doi.org/10.1057/s41294-018-0061-9.Search in Google Scholar
De Grauwe, P., and C. Macchiarelli. 2015. “Animal Spirits and Credit Cycles.” Journal of Economic Dynamics and Control 59 (C): 95–117. https://doi.org/10.1016/j.jedc.2015.07.003.Search in Google Scholar
Dickinson, D. L., and R. J. Oxoby. 2011. “Cognitive Dissonance, Pessimism, and Behavioral Spillover Effects.” Journal of Economic Psychology 32 (3): 295–306. https://doi.org/10.1016/j.joep.2010.12.004.Search in Google Scholar
Dommes, K., M. Schmitt, and E. Steurer. 2019. “Capital Structures in German Small and Mid Caps: Does Trade-Off or Pecking Order Theory Explain Current Reality Better?” Journal of Financial Risk Management 8 (3): 147–62. https://doi.org/10.4236/jfrm.2019.83010.Search in Google Scholar
Dräger, V., L. Heckmann-Draisbach, and C. Memmel. 2021. “Interest and Credit Risk Management in German Banks: Evidence from a Quantitative Survey.” German Economic Review 22 (1): 63–95. https://doi.org/10.1515/ger-2019-0114.Search in Google Scholar
ECB. 2019. Survey on the Access to Finance of Enterprises: Methodological Information on the Survey and User Guide for the Anonymised Micro Dataset.2. Frankfurt: European Central Bank.Search in Google Scholar
ECB. 2020. “Weekly Financial Statements – Disaggregated Data.” https://www.ecb.europa.eu/press/pr/wfs/dis/html/index.en.html.Search in Google Scholar
Elliott, W. B., J. Koëter-Kant, and R. S. Warr. 2008. “Market Timing and the Debt–Equity Choice.” Journal of Financial Intermediation 17 (2): 175–97. https://doi.org/10.1016/j.jfi.2007.05.002.Search in Google Scholar
Fama, E. F., and K. R. French. 2002. “Testing Trade-Off and Pecking Order Predictions about Dividends and Debt.” Review of Financial Studies 15 (1): 1–33. https://doi.org/10.1093/rfs/15.1.1.Search in Google Scholar
Ferrando, A., M.-T. Marchica, and R. Mura. 2017. “Financial Flexibility and Investment Ability Across the Euro Area and the UK.” European Financial Management 23 (1): 87–126. https://doi.org/10.1111/eufm.12091.Search in Google Scholar
Fidrmuc, J., C. Hainz, and W. Hölzl. 2018. “Individual Credit Market Experience and Perception of Aggregate Bank Lending: Evidence from a Firm Survey.” WIFO Working Papers, No. 574.Search in Google Scholar
Frank, M. Z., V. K. Goyal, and T. Shen. 2020. “The Pecking Order Theory of Capital Structure: Where Do We Stand?” Oxford Research Encyclopedia of Economics and Finance.10.1093/acrefore/9780190625979.013.606Search in Google Scholar
Giannetti, C. 2019. “Debt Specialization and Performance of European Firms.” Journal of Empirical Finance 53 (C): 257–71. https://doi.org/10.1016/j.jempfin.2019.07.008.Search in Google Scholar
Gottschalk, S., F. J. Greene, and B. Müller. 2017. “The Impact of Habitual Entrepreneurial Experience on New Firm Closure Outcomes.” Small Business Economics 48 (2): 303–21. https://doi.org/10.1007/s11187-016-9780-3.Search in Google Scholar
Helwege, J., and N. Liang. 1996. “Is There a Pecking Order? Evidence from a Panel of IPO Firms.” Journal of Financial Economics 40 (3): 429–58. https://doi.org/10.1016/0304-405x(95)00851-5.Search in Google Scholar
Hodula, M., S. Malovaná, and J. Frait. 2022. “Too Much of a Good Thing? Households’ Macroeconomic Conditions and Credit Dynamics.” German Economic Review 23: 529–66. https://doi.org/10.1515/ger-2021-0033.Search in Google Scholar
Huang, R., and J. R. Ritter. 2005. “Testing the Market Timing Theory of Capital Structure.” Journal of Financial and Quantitative Analysis 1: 221–46.Search in Google Scholar
Igan, D., A. Mirzaei, and T. Moore. 2023. “Does Macroprudential Policy Alleviate the Adverse Impact of COVID-19 on the Resilience of Banks?” Journal of Banking & Finance 147 (10641): 1–6. https://doi.org/10.1016/j.jbankfin.2022.106419.Search in Google Scholar
Jensen, M. C., and W. H. Meckling. 1976. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics 3 (4): 305–60. https://doi.org/10.1016/0304-405x(76)90026-x.Search in Google Scholar
Jiang, X., J. H. Shen, and C.-C. Lee. 2021. “Toward an Empirical Investigation of the Long-Term Debt and Financing Deficit Nexus: Evidence from Chinese-Listed Firms.” Applied Economics 53 (33): 3832–53. https://doi.org/10.1080/00036846.2021.1887805.Search in Google Scholar
Karpetis, C., S. Papadamou, E. Spyromitros, and E. Varelas. 2019. “Optimism-Pessimism Effects on Money Demand: Theory and Evidence.” Review of Behavioral Finance 11 (1): 23–35. https://doi.org/10.1108/rbf-06-2018-0061.Search in Google Scholar
Kon, Y., and D. J. Storey. 2003. “A Theory of Discouraged Borrowers.” Small Business Economics 21 (1): 37–49. https://doi.org/10.1023/a:1024447603600.10.1023/A:1024447603600Search in Google Scholar
Lambrinoudakis, C., G. Skiadopoulos, and K. Gkionis. 2019. “Capital Structure and Financial Flexibility: Expectations of Future Shocks.” Journal of Banking & Finance 104: 1–8. https://doi.org/10.1016/j.jbankfin.2019.03.016.Search in Google Scholar
Li, S., and B. Wang. 2019. “Evolutionary Game Simulation of Corporate Investing and Financing Behavior from a Risk Perspective.” Cluster Computing 22 (S3): 5955–64. https://doi.org/10.1007/s10586-018-1734-x.Search in Google Scholar
López-Gracia, J., and F. Sogorb-Mira. 2008. “Testing Trade-Off and Pecking Order Theories Financing SMEs.” Small Business Economics 31 (2): 117–36. https://doi.org/10.1007/s11187-007-9088-4.Search in Google Scholar
Malmendier, U., and G. Tate. 2005. “CEO Optimism and Corporate Investment.” The Journal of Finance 60 (6): 2661–700. https://doi.org/10.1111/j.1540-6261.2005.00813.x.Search in Google Scholar
Malmendier, U., and G. Tate. 2008. “Who Makes Acquisitions? CEO Optimism and the Market’s Reaction.” Journal of Financial Economics 89 (1): 20–43. https://doi.org/10.1016/j.jfineco.2007.07.002.Search in Google Scholar
Martinez, L. B., M. B. Guercio, and A. F. Bariviera. 2022. “A Meta‐Analysis of SMEs Literature Based on the Survey on Access to Finance of Enterprises of the European Central Bank.” International Journal of Finance & Economics 27 (2): 1870–85. https://doi.org/10.1002/ijfe.2247.Search in Google Scholar
Massenot, B., and Y. Pettinicchi. 2018. “Can Firms See into the Future? Survey Evidence from Germany.” Journal of Economic Behavior & Organization 145 (1): 66–79. https://doi.org/10.1016/j.jebo.2017.10.018.Search in Google Scholar
Mitchell, K., and D. K. Pearce. 2020. “How Did Unconventional Monetary Policy Affect Economic Forecasts?” Contemporary Economic Policy 38 (1): 206–20. https://doi.org/10.1111/coep.12440.Search in Google Scholar
Moscarini, G. 2004. “Limited Information Capacity as a Source of Inertia.” Journal of Economic Dynamics and Control 28 (10): 2003–35. https://doi.org/10.1016/j.jedc.2003.08.002.Search in Google Scholar
Myers, S. C. 1984. “The Capital Structure Puzzle.” The Journal of Finance 39 (3): 574–92. https://doi.org/10.1111/j.1540-6261.1984.tb03646.x.Search in Google Scholar
Nagakura, D. 2020. “Models and Tests for the Pecking Order Hypothesis.” SSRN Electronic Journal 3534737: 1–8, https://doi.org/10.2139/ssrn.3534737.Search in Google Scholar
Ni, J., and M. Yu. 2008. “Testing the Pecking-Order Theory: Evidence from Chinese Listed Companies.” The Chinese Economy 41 (1): 97–113. https://doi.org/10.2753/ces1097-1475410105.Search in Google Scholar
Nikolov, B., L. Schmid, and R. Steri. 2021. “The Sources of Financing Constraints.” Journal of Financial Economics 139 (2): 478–501. https://doi.org/10.1016/j.jfineco.2020.07.018.Search in Google Scholar
Nofsinger, J. R. 2005. “Social Mood and Financial Economics.” The Journal of Behavioral Finance 6 (3): 144–60. https://doi.org/10.1207/s15427579jpfm0603_4.Search in Google Scholar
Petersen, M. A., and R. G. Rajan. 1994. “The Benefits of Lending Relationships: Evidence from Small Business Data.” The Journal of Finance 49 (1): 3–7. https://doi.org/10.1111/j.1540-6261.1994.tb04418.x.Search in Google Scholar
Ratih, D. 2019. “Equity Market Timing and Capital Structure: Evidence on Post-IPO Firms in Indonesia.” International Journal of Emerging Markets 16 (2): 391–407. https://doi.org/10.1108/ijoem-04-2018-0197.Search in Google Scholar
Robson, P., C. Akuetteh, I. Stone, P. Westhead, and M. Wright. 2013. “Credit-Rationing and Entrepreneurial Experience: Evidence from a Resource Deficit Context.” Entrepreneurship & Regional Development 25 (5–6): 349–70. https://doi.org/10.1080/08985626.2012.729091.Search in Google Scholar
Roger, T., P. Roger, and A. Schatt. 2018. “Behavioral Bias in Number Processing: Evidence from Analysts’ Expectations.” Journal of Economic Behavior & Organization 149: 315–31. https://doi.org/10.1016/j.jebo.2018.02.026.Search in Google Scholar
Sclip, A. 2022. “Do SMEs Benefit from the Corporate Sector Purchase Program? Evidence from the Eurozone.” The European Journal of Finance 28 (12): 1212–36. https://doi.org/10.1080/1351847x.2021.1971100.Search in Google Scholar
Sette, E., and G. Gobbi. 2015. “Relationship Lending during a Financial Crisis.” Journal of the European Economic Association 13 (3): 453–81. https://doi.org/10.1111/jeea.12111.Search in Google Scholar
Thaler, R. H. 1994. Quasi Rational Economics, 1st ed. New York: Russell Sage Foundation.Search in Google Scholar
Thaler, R. H. 1999. “The End of Behavioral Finance.” Financial Analysts Journal 55 (6): 12–7. https://doi.org/10.2469/faj.v55.n6.2310.Search in Google Scholar
Zeidan, R., K. Galil, and O. M. Shapir. 2018. “Do Ultimate Owners Follow the Pecking Order Theory?” The Quarterly Review of Economics and Finance 67: 45–50. https://doi.org/10.1016/j.qref.2017.04.008.Search in Google Scholar
Zhang, R., and Y. Kanazaki. 2007. “Testing Static Tradeoff Against Pecking Order Models of Capital Structure in Japanese Firms.” International Journal of Accounting and Information Management 15 (2): 24–36. https://doi.org/10.1108/18347640710837335.Search in Google Scholar
Supplementary Material
This article contains supplementary material (https://doi.org/10.1515/ger-2022-0102).
© 2023 Walter de Gruyter GmbH, Berlin/Boston