The Principal, the Agent, and the Culture: Potential Impacts of Culture on Financing Contracts

ABSTRACT

Entrepreneurs are vital for the success of any country, especially that of emerging and newly emerging economies. In this article, we look at how financial information sharing by entrepreneurs impacts access to capital. We model the relationship between entrepreneurs and lenders as that of a principal-agent and show how this agency theory perspective combined with culture of the country can present a richer understanding of the relationship between information sharing and access to capital. Implications of our findings are discussed in detail.

KEYWORDS:

• International accounting
• small business financial reporting
• small business access to credit
• agency theory
• agency theory and financing contracts
• culture and financing contracts
• agency theory and culture
• agency theory and cultural dimensions

Disclosure statement

No potential conflict of interest was reported by the authors.