Relationship banking, relationship lending, small business finance, loan pricing, collateral,

This study analyzes the role of personal guarantees and collateral in the context of two different lending structures: one transaction and the other relationship based. The Finnish bank data, which were uniquely accessible for the study, enabled an exploration of credit files with specific details of the characteristics of the lending relationship during the period 1995–2001. According to the empirical results, the use of personal guarantees is an indication of transaction‐based lending. Personal guarantees seem to increase the loan premium in transaction‐based loans more than in relationship‐based loans. Close ties between a bank and a firm seem to be a desirable basis for small and medium‐sized enterprise bank lending.

Insider trading, Earnings announcements, Legislation, D82, G32, M40, K42,

This study analyzes corporate social responsibility (CSR) issues in small business finance in Finland, especially within relationship banking. The study combines credit-file data obtained from a large local Finnish bank with a CSR questionnaire conducted with the bank's business loan managers. The credit-file data contain specific details of CSR characteristics, as well as relationship-, collateral-, firm-, and loan-specific characteristics. CSR, typically considered as a non-financial item, contains value-relevant financial information which affects the loan pricing level. The results show that both overinvestment in CSR and the value created by CSR are valid but connected to different CSR characteristics. Overinvestment is associated with the environment and value creation with diversity and employees. The results contribute to the understanding of the characteristics of CSR in the context of small business bank lending, as well as more generally to important implications for small firms, banks, and management practices.

This study analyzes corporate social responsibility (CSR) issues in small business finance in Finland, especially within relationship banking. The study combines credit-file data obtained from a large local Finnish bank with a CSR questionnaire conducted with the bank's business loan managers. The credit-file data contain specific details of CSR characteristics, as well as relationship-, collateral-, firm-, and loan-specific characteristics. CSR, typically considered as a non-financial item, contains value-relevant financial information which affects the loan pricing level. The results show that both overinvestment in CSR and the value created by CSR are valid but connected to different CSR characteristics. Overinvestment is associated with the environment and value creation with diversity and employees. The results contribute to the understanding of the characteristics of CSR in the context of small business bank lending, as well as more generally to important implications for small firms, banks, and management practices.