Risk-Taking, Agency Problem, and Small Business Loan Guarantee: An Application of Option Pricing Theory

Authors

Jacky C. So, Southern Illinois University
Rakesh Bharati, Southern Illinois University
Susan Crain, Southern Illinois University

Abstract

We examine the relationship between the small business loan guarantee and the agency problem of small firms. We then recommend financial instruments or financial contracts that can minimize of eliminate the moral hazard problem.

JEL Codes

M13

Keywords

Loan Guarantee, Small Business Lending, Agency Problem, Risk, Small Business, Moral Hazard

Recommended Citation

So, Jacky C.; Bharati, Rakesh; and Crain, Susan (2001) "Risk-Taking, Agency Problem, and Small Business Loan Guarantee: An Application of Option Pricing Theory," The Journal of Entrepreneurial Finance: Vol. 6: Iss. 1, pp. 24-43.
DOI: https://doi.org/10.57229/2373-1761.1199
Available at: https://digitalcommons.pepperdine.edu/jef/vol6/iss1/3