Small Business Borrowing and the Owner-Manager Agency Costs: Evidence on Finnish Data

25 Pages Posted: 17 Jan 2006

See all articles by Mervi Niskanen

Mervi Niskanen

University of Eastern Finland

Jyrki Niskanen

University of Kuopio - Department of Business and Management

Multiple version iconThere are 2 versions of this paper

Date Written: August 18, 2006

Abstract

This study investigates the impact that managerial ownership has on loan availability and credit terms. We find that managerial ownership is common in a sample of small and medium sized Finnish firms. Our results suggest that an increase in managerial ownership decreases loan availability. The results on loan interest rates suggest that while an increase in managerial ownership initially increases interest rates, the effect is reversed at higher levels of ownership. Collateral requirements increase monotonically with managerial ownership. Overall, the results suggests that banks view that there are agency costs involved with managerial ownership even in small and medium sized firms and that this is taken into account when lending to these firms.

Keywords: Small business borrowing, agency costs, loan availability, credit terms

JEL Classification: G3

Suggested Citation

Niskanen, Mervi and Niskanen, Jyrki, Small Business Borrowing and the Owner-Manager Agency Costs: Evidence on Finnish Data (August 18, 2006). Available at SSRN: https://ssrn.com/abstract=874924 or http://dx.doi.org/10.2139/ssrn.874924

Mervi Niskanen (Contact Author)

University of Eastern Finland ( email )

PL 1627
Kuopio, 70211
Finland

Jyrki Niskanen

University of Kuopio - Department of Business and Management ( email )

Kuopio, 70211
Finland

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