Entrepreneur Debt Aversion and Financing Decisions: Evidence from COVID-19 Support Programs

Mikael Paaso; Vesa Pursiainen; Sami Torstila

Entrepreneur Debt Aversion and Financing Decisions: Evidence from COVID-19 Support Programs

Mikael Paaso
, Vesa Pursiainen
, Sami Torstila

Department of Finance

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

An entrepreneur's negative attitude towards debt - debt aversion - affects the financing decisions of the businesses they run. Controlling for a range of observable traits, firms run by highly debt-averse entrepreneurs are about nine percentage points less likely to use debt. The same entrepreneurs are also almost 25% less likely to take up government-guaranteed debt during the COVID-19 crisis. These firms show less interest in COVID-19 support policies if they perceive them to involve debt, based on experiments randomizing the framing and labeling of otherwise nearly identical, hypothetical COVID-19 support policies as debt or grants.

Original language	English
Journal	Management Science
Publication status	Accepted/In press - 2025

Bibliographical note

JEL Classification: G02, G32, H12, H25, H32

Access to Document

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3615299

Cite this

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title = "Entrepreneur Debt Aversion and Financing Decisions: Evidence from COVID-19 Support Programs",

abstract = "An entrepreneur's negative attitude towards debt - debt aversion - affects the financing decisions of the businesses they run. Controlling for a range of observable traits, firms run by highly debt-averse entrepreneurs are about nine percentage points less likely to use debt. The same entrepreneurs are also almost 25\% less likely to take up government-guaranteed debt during the COVID-19 crisis. These firms show less interest in COVID-19 support policies if they perceive them to involve debt, based on experiments randomizing the framing and labeling of otherwise nearly identical, hypothetical COVID-19 support policies as debt or grants. ",

author = "Mikael Paaso and Vesa Pursiainen and Sami Torstila",

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language = "English",

journal = "Management Science",

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AB - An entrepreneur's negative attitude towards debt - debt aversion - affects the financing decisions of the businesses they run. Controlling for a range of observable traits, firms run by highly debt-averse entrepreneurs are about nine percentage points less likely to use debt. The same entrepreneurs are also almost 25% less likely to take up government-guaranteed debt during the COVID-19 crisis. These firms show less interest in COVID-19 support policies if they perceive them to involve debt, based on experiments randomizing the framing and labeling of otherwise nearly identical, hypothetical COVID-19 support policies as debt or grants.

M3 - Article

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