Managers’ loss aversion and firm debt financing: Some insights from Vietnamese SMEs

Abstract

This study aims to examine whether managers' loss aversion has significant impact on debt financing behavior of SMEs. For this purpose, we carried out a lab-in-the-field experiment with a sample of top managers from 320 textile and garment SMEs in Vietnam. We find that SMEs led by more loss-averse managers are less likely to access domestic debt, and have a significantly lower level of foreign debt. Notably, we observe that loss aversion exerts a stronger effect on domestic debt than on foreign debt financing behavior.