Cultural Preferences and the Choice between Formal and Informal Financing

Item Type Monograph (Working Paper)
Abstract

This paper documents significant differences in the financing structure of small firms with managers of diverse cultural backgrounds. To separate the effect of culture from other factors that affect the financing structure of firms, we exploit cultural heterogeneity within a geographical area with shared regulations, institutions, and macroeconomic cycles. Our findings suggest that there exist significant differences in the culturally embedded preferences towards the use of formal and informal sources of financing (bank loans and trade credit). Our results are robust to alternative explanations based on potential differences in credit constraints and in the distribution of cultural origins across industrial sectors, trading partners, and headquarters location.

Authors Bedendo, Mascia; García-Appendini, Emilia & Siming, Linus
Language English
Keywords Managerial cultural origin, Informal financing, Trade credit, Small firm financing
Subjects finance
HSG Classification contribution to scientific community
HSG Profile Area None
Date May 2017
Publisher SoF - HSG
Place of Publication St. Gallen
Series Name School of Finance Working Paper Series
Volume 2017/07
Number 07
Number of Pages 43
Depositing User Geraldine Frei-Böbel
Date Deposited 08 Jun 2017 11:10
Last Modified 08 Jun 2017 11:10
URI: https://www.alexandria.unisg.ch/publications/250985

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Citation

Bedendo, Mascia; García-Appendini, Emilia & Siming, Linus: Cultural Preferences and the Choice between Formal and Informal Financing. School of Finance Working Paper Series, 2017, 07.

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https://www.alexandria.unisg.ch/id/eprint/250985
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