Attitudes Toward Noncompliance and the Demand for External Financing

Abstract

We study the link between the individual propensity to violate moral principles and the demand for finance based on two data sets: the World Values Survey and a data set with the legal records of U.S. chief executive officers (CEOs). We find that individuals who are more tolerant of moral principle violations are more likely to borrow. Corporate executives with legal records are also associated with larger mortgages. Reverse causality and attitudes toward risk are unlikely explanations for our findings. We contend that noncompliance relaxes participation constraints in capital markets by lowering the psychological costs of entering and breaking a contract.

Publication Date

4-1-2019

Publication Title

Journal of Financial and Quantitative Analysis

Volume

54

Issue

2

Number of Pages

967-991

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1017/S0022109018000868

Socpus ID

85053154172 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/85053154172

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