The Impact of Relationship Lending on Bank Loan Process for Korean SMEs

We investigate the effects of the bank-firm relationships on the decision making process regarding loan application, loan approval, and loan interest rate. To do this, we use data from 2016, and 2017 Surveys of Korea Small Business Finance conducted by Industrial Bank of Korea. We found that a more intense bank-firm relationship increases the likelihood of loan approval. Also, SMEs borrowing from lower number of banks and with more concentrated loans in main bank seem to obtain credit from main bank at lower interest rate than others. But applying for a loan is not related to the bank-firm relationship. This findings suggest that a close bank-firm relationship can reduce information asymmetry problem and alleviate SMEs’ credit constraint. Also bank-firm relationships seem to be important in determining the loan interest rate. As a relsult, our findings support that relationship lending has a beneficial effect on the supply side of the Korean SME credit market.

Effect of Corporate Social Responsibility on Pricing of Small Business Loans

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.

Effect of Corporate Social Responsibility on Pricing of Small Business Loans

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.

Determinants of Small Business Owner Loan

Shareholders and debtholders have diverging objectives. Shareholders are residual claimants whereas debtholders are fxed claimants to frm’s assets. In leveraged frms, shareholders may increase the value of their claims at the expense of debtholders. The presence of shareholders being debtholders is a smart interest alignment, providing a solution to shareholder-debtholder conflicts. This paper focuses on small businesses, which play an important role in the United States economy but are generally neglected by academia. Utilizing National Survey of Small Business Finance (NSSBF) data, this paper shows that frms with higher agency cost of debt are more likely to issue owner loan. The incidence of small business owner loan is positively associated with external lending diffculty, low shareholder agency cost and frm valuation diffculty.

Social Enterprise Exits

This chapter explores how social enterprise law can shape social enterprise exits, whether by sale, dissolution, or bankruptcy. It explains that the threat of exit looms large over social enterprises, their founders, and their investors. It then draws on lessons from unlikely sources—venture capital, public company mergers and acquisitions, and small business finance—to design contract terms and corporate governance provisions that can prevent exit from threatening a venture’s social mission. The chapter argues that even in the context of exit by dissolution, contract, and governance can be deployed to preserve a firm’s chosen balance of finance and social mission. It cautions social entrepreneurs and investors, however, that the utility of these tools wanes if a venture becomes insolvent. Whether in a formal bankruptcy proceeding or a more informal dissolution, if assets are insufficient to meet a social enterprise’s financial obligations, creditors’ interests become paramount.

THE EFFICIENCY OF BANKS IN INDONESIA: SHARIA VS. CONVENTIONAL BANKS

This paper evaluates the performance of Indonesian banking sector, focusing on technical efficiency of sharia and conventional banks along with the determinants of its efficiency during the period 2002-2010. Data Envelopment Analysis is employed to estimate banks technical efficiency and Tobit-regression is used to reveal the determinants of the efficiency over the panel data of 116 banks, including 109 conventional banks and 7 sharia banks. The result shows that sharia banks outperformed conventional banks in one model when it takes into account small business finance (SBF) as one of the output components in the model. Sharia banks have higher average SBF portfolio than those of conventional banks’ portfolio. The result indicates the efforts of Indonesian sharia banks to obey one of the principles in Islamic banking, “the emphasis on Islamic principles of morality”. By observing all models, it is concluded that the size of the bank, capital adequacy and liquidity are of banks characteristic factors which are very important to increase banks’ efficiency