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This paper models the borrowing decision of a small firm seeking a bank loan when it can optionally hire, at a cost, an independent external auditor to convey its risk characteristics to lenders. The analysis shows that a necessary condition for a potential borrower to prefer having an audit to...
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While academic research concerning capital structure of large corporations has been abundant in the finance literature, studies of small firms have been somewhat less common, and investigation of capital structure at origin (start-up) has been virtually nil. In this paper we present empirical...
Persistent link: https://www.econbiz.de/10011310325
by examining the nature of small business lending and the factors that make banks the primary providers of credit to … whether the nature of small business lend­ing satisfies those conditions. We argue that certain characteristics of small firm … lending to small busi­nesses. Securitizations of small business loans could still take place, but they are likely to be …
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