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http://ssrn.com/abstract=1437829
 
 

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Entrepreneurial Optimism, Credit Availability, and Cost of Financing: Evidence from U.S. Small Businesses


Na Dai


State University of New York at Albany - School of Business & Center for Institutional Investment Management

Vladimir I. Ivanov


US Securities & Exchange Commission

June 21, 2010


Abstract:     
Does entrepreneurial optimism affect the financing decisions? Do financiers have better knowledge of entrepreneurs’ unrealistic optimism and curtail lending to them? Using a large sample of U.S. small businesses and a new measure of optimism, we find that more optimistic entrepreneurs tend to use more short-term debt. We do not find evidence that banks curtail lending to more optimistic entrepreneurs. In fact, banks are more likely to approve loan applications by optimistic entrepreneurs, they do not charge an interest premium, and do not require more collateral. Our results are robust to alternative measures of optimism, alternative samples, and controls for private information.

Number of Pages in PDF File: 55

Keywords: Optimism, Small Business Financing, Credit Availability, Capital Structure

JEL Classification: G32, M13

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Date posted: July 25, 2009 ; Last revised: June 22, 2010

Suggested Citation

Dai, Na and Ivanov, Vladimir I., Entrepreneurial Optimism, Credit Availability, and Cost of Financing: Evidence from U.S. Small Businesses (June 21, 2010). Available at SSRN: http://ssrn.com/abstract=1437829 or http://dx.doi.org/10.2139/ssrn.1437829

Contact Information

Na Dai (Contact Author)
State University of New York at Albany - School of Business & Center for Institutional Investment Management ( email )
1400 Washington Ave.
Albany, NY 12222
United States
Vladimir Ivanov
US Securities & Exchange Commission ( email )
Washington, DC
United States
202-551-5307 (Phone)
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