Johan Almenberg () and Artashes Karapetyan
Johan Almenberg: Research Institute of Industrial Economics (IFN), Postal: and Stockholm School of Economics
Artashes Karapetyan: Empirical Institute of Economics and SFI, Postal: University of Zürich, Switzerland
Abstract: We use a survey to identify a consumer bias with regard to different sources of debt-financing. Less salient debt may generate psychological benefits. This should be weighed against the possible economic costs of a sub-optimal capital structure; but low levels of financial literacy make it unlikely that all households perceive the full economic costs. As a result there is a bias in favour of less salient debt. In a market with limited scope for arbitrage this consumer bias is likely to generate inefficiencies. We examine such a market in both theory and practice. The predictions of our model are given strong support by market data.
44 pages, June 4, 2009
Full text files
Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2022-06-28 23:22:19.