Long-Term Orientation and Relationship Lending – A Cross-Cultural Study on the Effect of Time Preferences on the Choice of Corporate Debt

Management International Review 54, 381-415, 2014

48 Pages Posted: 1 Nov 2010 Last revised: 31 Jul 2014

See all articles by Ron C. Antonczyk

Ron C. Antonczyk

Aachen University - Department of Finance

Wolfgang Breuer

RWTH Aachen University

Astrid Juliane Salzmann

Catholic University of Lille - IESEG School of Management; RWTH Aachen University - Department of Finance

Date Written: November 22, 2013

Abstract

We examine how time preferences impact the financing decision of firms. We hypothesize that the degree of long-term orientation in a country is positively related to the use of bank relationship lending. Based on a thorough theoretical investigation and an extensive empirical analysis using a large, worldwide dataset, we find strong support for our hypothesis on the role of time preferences for financial intermediation. Our results are robust to controlling for other determinants of the choice of debt financing as well as to applying alternative variables and different estimation methods. Firms in long-term orientation countries appear to prefer relationship bank financing, since it is usually available for the long run and will not be with-drawn quickly in response to adverse developments. This allows managers to preserve a more strategic view and pursue longer planning horizons.

Keywords: Agency Theory, Bank Loans, Financial Intermediation, National Culture, Relationship Lending

JEL Classification: A13, F30, G21, G32, Z10

Suggested Citation

Antonczyk, Ron C. and Breuer, Wolfgang and Salzmann, Astrid Juliane, Long-Term Orientation and Relationship Lending – A Cross-Cultural Study on the Effect of Time Preferences on the Choice of Corporate Debt (November 22, 2013). Management International Review 54, 381-415, 2014, Available at SSRN: https://ssrn.com/abstract=1700895 or http://dx.doi.org/10.2139/ssrn.1700895

Ron C. Antonczyk

Aachen University - Department of Finance ( email )

Aachen
Germany

Wolfgang Breuer

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

Astrid Juliane Salzmann (Contact Author)

Catholic University of Lille - IESEG School of Management ( email )

Socle de la Grande Arche
1 Parvis de la Defense
Puteaux, Paris 92800
France

RWTH Aachen University - Department of Finance ( email )

Templergraben 64
Aachen, 52056
Germany

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