Leverage financing and the risk taking behavior of small business managers: what happened after the crisis?

The relationship between leverage and the risk-taking behavior has been largely investigated. However, little attention has been attributed to the link between these two variables for small and medium-sized enterprises (SMEs), especially during and after the global crisis in continental Europe. Consequently, this paper tries to fill this gap by examining the impact of leverage on the risk-taking behavior of small business managers in France. Using a sample of 1403 French listed SME-observations over the period 2008 to 2016, the empirical findings show that corporate leverage is positively and significantly related to the risk-taking behavior of corporate managers. This relationship is more striking and robust after than during the global crisis, especially for low growth firms. Thus, credit institutions seem to favor a high restriction a debt during the crisis and to limit their monitoring scope after the crisis particularly for firms with low conflict of interests in order to limit the related costs