Abstract The role of relationship banking has been the subject of intensive discussion in recent years. A large body of the literature has examined the benefits and costs related to lender-borrower relationships in small business finance. Despite the numerous studies conducted in both market-based and bank-based economies, the specific sources of the determinants of the value of relationship lending are ambiguous. However, many research results imply that a close and long-term relationship with the bank is desirable for small businesses. In this study, we investigate the sources of value in Finnish lender-borrower relationships in small business finance. We conduct three separate empirical studies that cover the following aspects of relationship banking: determinants of the value of the bank-firm relationship, collateral requirements and borrower risk, and the comparison of the different characteristics of relationship banking in bank financing and non-bank financing. We use unique and detailed credit file data from two sources, bank data from one of the largest banks in Finland and non-bank data from a large financial institution owned by the Finnish state. Both datasets cover the period 1995 to 2001. Our main findings are the following. First, duration and scope are important characteristics in determining the sources of value in the bank-firm relationship. We find that a longer relationship tends to lower the cost of the credit, and that wider scope tends to decrease the collateral requirements significantly. Second, a long-lasting bank-firm relationship is beneficial, especially to high-risk firms. As the relationship matures, loan premiums for high-risk firms decrease at a higher rate than for low-risk firms. Third, low-risk borrowers put up more collateral than high-risk borrowers, which implies the existence of a signaling effect. According to the signaling theory, low-risk firms are willing to pledge more collateral than high-risk firms. Fourth, when comparing bank and non-bank credit files, we find that bank-firm characteristics are not fully transferable to the relationship between a non-bank and a firm.

No description available.

Bakgrund: Kreditvärdighet är ett ämnesområde för bankerna att bedöma om en kund är kreditvärdig. Bankerna använder sig av olika bedömningsfaktorer för att bedöma huruvida företaget är en lämplig låntagare. Detta görs för att man skall få en uppfattande bild av företaget. Problemfråga: Hur går bankers kreditbedömning av små och medelstora företag till? Syfte: Syftet är att studera om bankerna skiljer sig åt vad det gäller kreditbedömningen för små och medelstora företag samt på vilket sätt de granskar informationen som de får av företagen. Metod: Syftet kommer att besvaras med en empirisk undersökning som grundar sig på teorin förtroende och principal-agentteorin. Vi har kompletterat teorierna med tidigare studier, vetenskapliga artiklar, litteraturer, årsredovisningar och intervjuer. Slutsats: Slutsatsen är att det inte finns några markanta skillnader i den här studien, därför att samtliga banker gör en allsidig bedömning av företaget för att bedöma kreditvärdigheten, genom att de tar hänsyn till både finansiella och icke-finansiella faktorer. En liten avvikelse som vi dock fann är att Handelsbanken betonar tron på verksamheten mer i jämförelse med Nordea, detta har göra med att frihet ges till Handelsbanken vid beviljande av krediten då banken är väldigt decentraliserad. / Background: Creditworthiness is a subject for banks to assess whether a customer is creditworthy or not. The banks use different assessment factors in order to assess whether the company is a suitable borrowers. This is done in order to get a perception picture of the companies. Problem issue: How does banks credit evaluate to small and medium-sized enterprises? Purpose: The purpose is to study whether the banks proves to be different in terms of credit assessment for small and medium-sized enterprises and in what way they review the information they receive from companies Method: The purpose will be answered by an empirical study based on the theory of trust and principal-agent theory. We have complemented the theories with previous studies, scientific articles, literatures, annual reports and interviews. Conclusion: The conclusion is that there are no significant differences in this study because all banks make a comprehensive assessment of the company to assess creditworthiness, by taking into account both financial and non-financial factors. A small difference we found is that Handelsbanken underlines belief the business more in comparison with Nordea, this has to do with the liberty given to Handelsbanken in the granting of credit which the banks are highly decentralized.

Dans un environnement économique encore fragilisé par la Grande Récession, les PME apparaissent comme un moteur essentiel de l’activité et de l’emploi. Dans cette thèse, j’examine les déterminants et les conséquences des contraintes financières des PME afin d’identifier les formes de financement bancaire les mieux adaptées à leurs situations. Le premier chapitre analyse les effets des modèles d’activité bancaire sur le financement des PME et montre que les banques de trading augmentent les contraintes de crédit de court terme ainsi que les coûts de financement. Surtout, l’externalité négative du trading sur la disponibilité du crédit de court terme est encore plus forte pour les banques fortement capitalisées et dépendantes des produits dérivés. Le deuxième chapitre porte sur l’effet bénéfique de la relation bancaire pour les PME. Nous montrons que les prêteurs relationnels pratiquent des taux plus élevés en période de croissance et des taux plus bas en période de crise. Cependant, en incluant les entreprises monobancaires dans notre analyse, nous constatons que ce mécanisme assurantiel dépend de la capacité des entreprises à diversifier leurs emprunts auprès de plusieurs banques. Enfin, le troisième chapitre se focalise sur les effets réels des contraintes financières. Mes résultats mettent en lumière l’importance capitale du financement de court terme pour l’investissement des PME à travers le canal du besoin en fonds de roulement. Les entreprises qui ont des opportunités d’investissement ne peuvent pas les saisir car les contraintes de crédit de trésorerie les obligent à allouer davantage de cash-flow au financement du besoin en fonds de roulement. / Representing a clear driver for growth and employment, small and medium sized enterprises (SMEs) have gained considerable attention in the aftermath of the Great Recession. In this thesis, I both examine the determinants and consequences of SMEs financial constraints in order to identify the most appropriate types of bank financing for their situations. The first chapter analyzes the effects of trading bank business models on SME finance and shows that trading banks increase both short term credit constraints and funding costs. Importantly, the negative impact of trading-banks on short term credit availability is even stronger for banks with higher capital and derivatives.The second chapter deals with the beneficial effect of relationship lending for SMEs. Following the literature that has investigated the countercyclical effect of relationship lending on interest rates, we show that relationship lenders charge higher rates in good times and lower rates in bad times. However, we include single-banked firms in the scope and find that this insurance mechanism depends on the firm ability to diversify its borrowing.The third chapter focuses on the real effects of financial constraints. While the literature examining the effects of financial constraints on firms’ investment has traditionally ignored loan maturity, my results emphasize the importance of short-term finance for SMEs through the working capital channel. The real effect of short term financial constraints arises when firms with opportunities to invest may be blocked from doing so because rationing may force them to allocate additional cash-flow to finance their working capital needs.

Svenska banker har genomgått flera finanskriser som resulterat i olika konsekvenser, bland annat kreditförluster. Intresset för varför en del banker drabbades mer medan andra drabbades mindre påverkade valet av problemområde. Många studier har gjorts beträffande kreditbeslut vid nya krediter, dock verkade området kring kredituppföljningen, det sekundära kreditbeslutet, vara relativt outforskat. Förhoppningen var att kunna bidra med kunskap som dels kunde vara användbar för kreditgivare, genom att dra lärdom av bra exempel, och dels vara brukbar för låntagarna. En annan önskan var att ge inspiration till ytterligare studier i ett relativt outforskat område. En noggrann kredituppföljning är också betydelsefull för samhället i stort. Syftet var att få en bättre bild av hur kredituppföljningsprocessen utförs i praktiken i svenska banker. Genom kvalitativa intervjuer har kredituppföljningen studerats hos sex banker i västra Sverige; Handelsbanken, Länsförsäkringar Bank, Swedbank, SEB samt två Fristående Sparbanker. Intervjupersonerna var personer med gedigen erfarenhet från utlåningsprocessen gentemot företag. Den empiriska undersökningen visade en stor överensstämmelse kring hur kredit-uppföljningen utförs i de banker som ingått i studien. Uppföljningsprocessen genomförs utifrån volym och någon form av riskklassificering. I beslutsunderlaget ingår såväl formella som informella delar, med andra ord både kvantitativ och kvalitativ information. Studien visade att både transaktions- och relationsutlåning är delar av det sekundära kreditbeslutet. En skillnad var hur stor betydelse de mjuka delarna har i kredituppföljningen. Min tolkning är att organisationskulturen har betydelse / Swedish banks have underwent several financial crises that have resulted in different type of consequences, amongst other things, credit losses. The interest for why some banks were hit more than others, influenced the choice of the problem area. Many studies have been made regarding lender decisions on new loans, however, the area related to the credit monitoring, i. e. the secondary lender decision, seems to be relatively unexplored. The aim was to contribute with knowledge that partly could be useful for creditors, through learnings from good examples, as well as partly be useful for the borrowers. Another expectation was to inspire to further studies of an area that has not been investigated deeply so far. A throught credit monitoring is also important for the society as much. The purpose was to get a better picture of how the credit monitoring processes are performed in practise in Swedish banks. Through qualitative interviews, the credit monitoring processes have been studied att six banks in the west part of Sweden. The banks are; Handelsbanken, Länsförsäkringar Bank, Swedbank, SEB and two independent banks. The respondents were persons with a solid and senior experience from lending processes towards companies. The empirical study showed a high degree of consistency in how the credit monitoring are performed at the Swedish banks that were a part of the investigation. The monitoring process are carried out based on volume and some type of risk assessment. The decision material contains formal as well as informal information or in other words: both quantitative as well qualitative information. The study showed that both transactional as well as relationship lending are parts of the secondary lender decision. One difference that was noticed, was how big importance the soft factors have in the credit monitoring process. My interpretation is that the organizational culture has an influence on this.

Durant les dernières décennies, le financement relationnel a fortement évolué. Il n’est plus considéré maintenant comme un simple mécanisme de réduction de l’asymétrie d’information. Cependant, de nombreuses questions restent non résolues. Quels sont ses déterminants ? Son utilisation impacte-t-elle de la même façon tous les agents ? Quels sont les substituts possibles ? La thèse s’organise autour de ces axes. Le premier chapitre traite de l’impact de la compétition bancaire sur la mise en place du financement relationnel. Le second chapitre s’intéresse à l’utilisation de ce financement par les minorités. Enfin, le troisième chapitre analyse la substitution potentielle entre crédit fournisseur et financement relationnel. En utilisant deux bases de données, l’une sur des PME américaines, l’autre des italiennes, nous montrons empiriquement que : 1. La concurrence interbancaire influence de manière non-linéaire le financement relationnel. Les banques favorisent un financement relationnel quand la compétition est faible, transactionnel quand elle s’intensifie avec un retour au relationnel en cas de forte compétition. Ce résultat est cohérent avec la vision du relationnel bancaire comme mécanisme de protection contre la compétition, tant qu’elle n’est pas trop intense. 2. Si l’utilisation du financement relationnel augmente dans un premier temps la discrimination subie par les minorités ethniques, celle-ci diminue avec le temps. Cela démontre la validité de la théorie psychologique du contact en finance. 3. Les entreprises opaques n’ayant pas accès au financement relationnel utilisent plus de crédit fournisseur. Celui-ci peut être vu comme un financement relationnel / Over the past decades, the definition of relationship banking has greatly evolved. It is no longer considered as a simple mechanism used to reduce information asymmetry. However, many questions remain. What are its determinants? Does its use impact all agents in the same way? What are its potential substitutes? This thesis is organized around these themes. The first chapter examines the impact of banking competition on relationship lending technology. The second chapter studies the use of relationship lending technology by minorities. Finally, the third chapter analyzes the potential substitution between relationship lending technology and trade credit. Using two different databases - the first one composed of US SMEs, the second of Italian SMEs - we empirically show that: 1. Banking competition impacts non-linearly the use of relationship lending technology. Banks favor relationship lending when competition is weak, transactional lending when it increases then return to relationship lending in case of strong competition. 2. If the use of relationship lending technology tends to first increase discrimination against minorities, this discrimination decreases with time. This result could be analyzed as an empirical validation of the psychological theory of contacts in finance. 3. Opaque firms without an access to relationship lending technology use more trade credit. Trade credit can be seen as a relationship lending technology

Abstract Business financing is crucial to the development and performance of small and medium enterprises (SME) in developing countries. Obtaining loans by SMEs in Jordan is vital for creating employment, reducing poverty ratio, and augmenting SMEs growth. The purpose of this qualitative multiple case study was to discover strategies SME owners use to access credit. The population comprised of 3 SME owners in Jordan who successfully accessed credit. The conceptual frameworks for this study were the social capital theory and the pecking order theory. Data were gathered using semistructured interviews and companies' archived records. Data were analyzed using thematic analysis; three themes emerged to include sources of finance, education and skills, and social networking. The implications for positive social change include the potential to help SME leaders develop strategies to stabilize and grow their businesses. Business growth can create jobs and decrease poverty in Jordan.

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No / Trust is expected to reduce transaction costs and agency costs and thus influence the cost of credit for small businesses. Assessments of trustworthiness are based on the ability, benevolence and integrity of the owner manager. The study examines whether lending managers’ assessments of the trustworthiness of small and medium-sized enterprise (SME) owner managers are associated with the interest rate charged. Data were obtained from a survey of lending managers from small banks in North East Italy. Control variables and a vector of trustworthiness factors were collected on a random sample of customers, resulting in data for 365 small firms (74% response rate). Multivariate regression analyses provided evidence of a negative association between trustworthiness and interest rates. Banks, owner managers, policy makers and researchers should recognise the potential of trust to influence lending decisions and behaviour.

Banks have a vital role in the society-wide green transition. However, the field of green finance is relatively unexplored in academia. Our study aims to extend the knowledge of green corporate loans by investigating what soft and hard information Swedish banks use to overcome the information asymmetry in the lending decision and what role the information plays. Based on fragmented literature, a tentative model is created, and used to form the study. The study adopts a qualitative research strategy and semi-structured interviews were held with respondents from the four largest banks in Sweden. Using the collected data, the tentative model was corroborated and adjusted, resulting in a finalised model. The study found that the following information components are used to evaluate green corporate loans: financial statements, collaterals, credit score, owners, character, micro and macro analysis, ESG approach and green criteria. Although most emphasis is put on hard information, soft information is also necessary for banks to make a lending decision. The study has multiple practical contributions relating to challenges posed by soft information, and the loan assessment. Theoretically, the study contributes with a baseline for future studies investigating the topic of green corporate loans.