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Bank Loan Financing Decisions of Small and Medium-Sized Enterprises: The Significance of Owner/Managers¡¯ Behaviours

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  • Forbeneh Agha Jude
  • Ntieche Adamou

Abstract

The objective of this study is to highlight the influence of entrepreneurs¡¯ behaviour on the decisions to apply for bank loans. A mixed research methodology known as triangulation was employed in order to achieve the objective of the study. Data were sourced from a stratified randomly selected sample of 450 Cameroonian SMEs and analysed using logistic regression. The result of the study revealed that both control aversion and overconfidence behaviours of the owner/managers influence significantly the decisions of SMEs to apply for bank loans. From the result, it is found that behavioural finance theory explains the decisions of SMEs to seek for bank credits. Contrary to the predictions of the pecking order theory, managerial behaviours such as the fear to loss the control of the firm, and overconfidence provide explanations on the decisions of SMEs to seek for bank loans. For instance, the fact that debt does not entail any loss of business control urges SMEs to prefer debt than external equity.

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  • Forbeneh Agha Jude & Ntieche Adamou, 2018. "Bank Loan Financing Decisions of Small and Medium-Sized Enterprises: The Significance of Owner/Managers¡¯ Behaviours," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(5), pages 231-241, May.
    • Handle: RePEc:ibn:ijefaa:v:10:y:2018:i:5:p:231-241
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    2. Anton Miglo, 2020. "Financing of Entrepreneurial Firms in Canada: Some Patterns," Administrative Sciences, MDPI, vol. 10(3), pages 1-27, August.

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    More about this item

    Keywords

    bank loans; financing decisions; owner/managers behaviours; and SMEs;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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