Business Strategy and Cost of Bank Loans

16 Pages Posted: 10 May 2021

See all articles by Md Ruhul Amin

Md Ruhul Amin

University of Texas - Rio Grande Valley, Robert C. Vackar College of Business & Entrepreneurship, Economics and Finance, Students

Abdullah-Al Masum

University of Wisconsin - Oshkosh

Date Written: May 7, 2021

Abstract

Following Miles and Snow’s Business Strategy (BS) topology, we find that banks impose
relatively higher loan spreads for the firms that follow an Innovation-Oriented Business Strategy
(IOBS). We further document that IOBS is positively associated with corporate risk measures such
as variances in equity returns and returns on assets. Overall, our findings suggest that banks charge a higher cost of debt in anticipation of borrowers’ payback riskiness from an IOBS.

Keywords: Business Strategy, cost of bank loan, loan spreads, prospectors, corporate risk

JEL Classification: G21, G32, O31

Suggested Citation

Amin, Md Ruhul and Masum, Abdullah Al, Business Strategy and Cost of Bank Loans (May 7, 2021). Available at SSRN: https://ssrn.com/abstract=3841664 or http://dx.doi.org/10.2139/ssrn.3841664

Md Ruhul Amin (Contact Author)

University of Texas - Rio Grande Valley, Robert C. Vackar College of Business & Entrepreneurship, Economics and Finance, Students ( email )

Edinburg, TX
United States

Abdullah Al Masum

University of Wisconsin - Oshkosh ( email )

College of Business
800 Algoma Blvd
Oshkosh, WI 54901
United States

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