Facing the financial risk, embracing the opportunity: How financial perceptions shape entrepreneurial behavior in recession periods

Abstract

Research background: Although bank credit is a widely used external source for businesses, access to this source becomes more limited during periods of economic recessions. Small firms and young entrepreneurs, in particular, may have a more pessimistic perception of bank lending accessibility due to their limited financial assets, lack of credit history, and insufficient financial statements, which cause information asymmetry. For these reasons, enterprises might have heightened perceptions of the bank credit application process, interest rates, and credit conditions that discourage them from undertaking entrepreneurial initiatives, leading to lower entrepreneurial intention (EI).

Purpose of the article: This paper examines whether a more intense perception difficulty in accessing bank credit is negatively associated with EI.

Methods: The paper analyzes 1367 firm executives who are purposively selected based on their job status. Ordinal Logistic Regression analysis is applied to perform research analyses.

Findings & value added: The findings reveal that a negative relationship exists between a more intense perception of credit access conditions and EI. The respondents who consider access to finance, credit conditions, and interest rates as inappropriate report greater EI, and vice versa. The results can be explained by Institutional Theory-related factors, such as banking sector competitiveness and economic development of countries. This paper makes several theoretical and practical contributions, including the integration of RBV and TPB approaches that represent the importance of financial management and entrepreneurial capabilities, respectively. On a practical level, the generation of soft loans and gaining insights into entrepreneurs are some practical contributions that borrowers and lenders can benefit from during times of economic downturn.

Keywords

financial risk management, entrepreneurial intention, Resource-based View, Theory of Planned Behavior, bank credit conditions

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