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    The innovation debt penalty: Cost of debt, loan default, and the effects of a public loan guarantee on high-tech firms

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    Authors
    Cowling, M
    Ughetto, E
    Lee, N.
    Affiliation
    University of Brighton
    Issue Date
    28/06/2017
    
    Metadata
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    Abstract
    High-technology firms per se are perceived to be more risky than other, more conventional, firms. It follows that financial institutions will take this into account when designing loan contracts, and that this will manifest itself in more costly debt. In this paper we empirically test whether the provision of a government loan guarantee fundamentally changes the way lenders price debt to high-tech firms. Further, we also examine whether there are differential loan price effects of a public guarantee depending on the nature of the firms themselves and the nature of the economic and innovation environment that surrounds them. Using a large UK dataset of 29,266 guarantee backed loans we find that there is a high-tech risk premium which is justified by higher default, but, in general, that this premium is altered significantly when a public guarantee is provided for all firms. Further, all these loan price effects differ on precise spatial economic and innovation attributes.
    Citation
    Cowling, M., Ughetto, E. and Lee, N., (2018). 'The innovation debt penalty: Cost of debt, loan default, and the effects of a public loan guarantee on high-tech firms'. Technological Forecasting and Social Change, 127, pp.166-176. DOI: 10.1016/j.techfore.2017.06.016
    Publisher
    Elsevier
    Journal
    Technological Forecasting and Social Change
    URI
    http://hdl.handle.net/10545/624076
    Additional Links
    https://www.sciencedirect.com/science/article/pii/S0040162517308028?via%3Dihub
    Type
    Article
    Language
    en
    ISSN
    401625
    Collections
    Derby Business School

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