The Need for Speed: The Impact of Capital Constraints on Strategic Misconduct
66 Pages Posted: 13 Feb 2024
Date Written: October 3, 2023
Abstract
This study analyzes the impact of reducing capital constraints on strategic misconduct in the South African minibus taxi industry measured by their propensity to speed and crash. I find that lower interest rates, a proxy for capital constraints, decrease the most severe forms of misconduct by the average owner-operator. Qualitative interviews and survey data suggest that this result is attributable to owner-operators’ efforts to avoid default. These results contribute to our understanding of firm strategies when facing financial pressure, highlighting the implications of affordable financing for firm behavior.
Keywords: Misconduct, Emerging Markets, Strategy, Capital Constraints
JEL Classification: M13, O17, D22
Suggested Citation: Suggested Citation