Business Strategy and Cost of Bank Loans

Authors

Md Ruhul Amin, The University of Texas Rio Grande ValleyFollow
Abdullah Al Masum, The University of Texas Rio Grande Valley

Document Type

Article

Publication Date

5-7-2021

Abstract

Following Miles and Snow’s Business Strategy (BS) topology, we find that banks impose relatively higher loan spreads for the firms that follow an Innovation-Oriented Business Strategy (IOBS). We further document that IOBS is positively associated with corporate risk measures such as variances in equity returns and returns on assets. Overall, our findings suggest that banks charge a higher cost of debt in anticipation of borrowers’ payback riskiness from an IOBS.

Recommended Citation

Amin, Md Ruhul and Masum, Abdullah Al, Business Strategy and Cost of Bank Loans (May 7, 2021). Available at SSRN: https://ssrn.com/abstract=3841664 or http://dx.doi.org/10.2139/ssrn.3841664

DOI

10.2139/ssrn.3841664