Bank vs. Bond Finance: A Cultural View of Corporate Debt Financing

Bryan Christiansen, Joyce Koeman (Eds.), “Handbook of Research on Global Business Opportunities”, Hershey, Pennsylvania, USA, pp. 289-315, 2014

39 Pages Posted: 16 Aug 2009 Last revised: 15 Dec 2014

See all articles by Wolfgang Breuer

Wolfgang Breuer

RWTH Aachen University

Benjamin Quinten

RWTH Aachen University - Chair for Business Administration, particularly Business Finance

Astrid Juliane Salzmann

RWTH Aachen University - Department of Finance

Date Written: August 15, 2009

Abstract

This study enhances the growing research field of Cultural Finance by analyzing the relationship between cultural value types – in particular Autonomy and Embeddedness – and the corporate debt choice of either bank or bond financing. We derive our hypotheses from a slight modification and re-interpretation of the Chemmanur and Fulghieri (1994) approach of “relationship lending”. Referring to the importance of specific human capital investments and individuals’ future orientation, we show that firms in Autonomy cultures tend toward bank finance, whereas firms in Embeddedness cultures show a preference for financing by issuing bonds. In a cross-country analysis with 71 countries, we find empirical evidence for our established hypotheses.

Keywords: National Culture, Cultural Values, Financing Structure

JEL Classification: A13, G21, G32, Z10

Suggested Citation

Breuer, Wolfgang and Quinten, Benjamin and Salzmann, Astrid Juliane, Bank vs. Bond Finance: A Cultural View of Corporate Debt Financing (August 15, 2009). Bryan Christiansen, Joyce Koeman (Eds.), “Handbook of Research on Global Business Opportunities”, Hershey, Pennsylvania, USA, pp. 289-315, 2014. Available at SSRN: https://ssrn.com/abstract=1455209 or http://dx.doi.org/10.2139/ssrn.1455209

Wolfgang Breuer

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

Benjamin Quinten (Contact Author)

RWTH Aachen University - Chair for Business Administration, particularly Business Finance ( email )

Templergraben 64
Aachen, 52056
Germany

Astrid Juliane Salzmann

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

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