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This paper focuses on whether the rule of law or capital market development can explain observed differences in working capital levels and trade credit in SMEs from 13 EU countries. Our findings indicate that the working capital levels are lower and working capital management is thus more efficient in countries with safer legal systems and better investor protection. We also find that operating in a market‐based capital system has a negative effect on the cash conversion cycle (CCC). This implies that firms operating in countries with a market‐based system as opposed to a bank‐based system have better opportunities to manage their working capital. Our findings indicate that country‐level legal instruments explain much of the cross‐country differences observed in working capital. The results also suggest that working capital practices and the extent to which trade credit is used are a product of the legal system and the financial systems in place in each country. If the financial system changes, the trade credit practices can also be expected to change.

The objective of this paper is to examine the impact of digitalization on the profitability of small- and medium-sized private healthcare companies. Previous studies suggest that digitalization has...

Purpose The purpose of this paper is to investigate whether religion or national culture can explain previously observed cross-country variation in trade credit. Design/methodology/approach Using the firm-level SME data from 35 European countries, religion and cultural factors of Hofstede and Schwartz, the authors provide new evidence on the determinants of the cross-country variation in trade credit. Findings The results indicate that religion and national culture are associated with trade credit. The authors find that the levels of trade credit are higher in Catholic countries than in Protestant ones and that peoples’ religiousness has an impact on trade credit only in Catholic countries. The authors also find that Hofstede’s cultural dimensions, such as power distance and uncertainty avoidance, are positively associated with trade credit. Practical implications Overall, authors’ findings indicate that religion and national culture are important determinants of trade credit management, and that the association between commonly used cultural values and trade credit depends on the religious, legal, and financial environment. Originality/value To the best of authors’ knowledge, this is the first study to research the relationship between national culture and trade credit.

Purpose The purpose of this paper is to investigate whether the relationship between capital structure and firm performance in small- and medium-sized enterprises (SMEs) is moderated by credit risk. Design/methodology/approach The authors empirically test whether an SME’s credit risk affects the SME’s relationship between capital structure and firm performance by using a 2012 cross-sectional sample of European SMEs from Austria, Belgium, Finland, France, Germany, Italy, Portugal, Spain, Sweden and the UK. Findings The empirical results suggest that in low credit risk SMEs, the debt ratio is negatively related to firm performance; however, this relationship is not present in high credit risk SMEs. Therefore, it is indicated that SME credit risk moderates the relationship between capital structure and firm performance. Practical implications The findings of the paper will enable financial managers to understand the importance of SMEs’ credit risk and will assist them in maximizing firms’ performance. Originality/value This paper extends the findings of previous studies by examining whether credit risk affects the relationship between capital structure and firm performance.

The purpose of this article is to examine the management control practices in small and medium-sized health care enterprises (SMEs). Previous studies suggest that there are often few, if any, comprehensive management control systems (MCS) or there is lack of systematic management accounting or performance management (PM) monitoring in even fairly large SMEs. The first contribution of this article is to present nine years of financial data of micro companies. The data itself is quite unique and not open data for everyone. On one hand, it gives further information about diverse and complex combinations of the profitability process in the small companies and how the MA systems affect it. Based on the contingency theory conception, this article finds that the management accounting practices such as a budgeting system or increased cost knowledge of the company influence the company's performance. Further, some of the contextual factors such as size and age of the company affected the company's performance in this study.

The purpose of this article is to examine the management control practices in small and medium-sized health care enterprises (SMEs). Previous studies suggest that there are often few, if any, comprehensive management control systems (MCS) or there is lack of systematic management accounting or performance management (PM) monitoring in even fairly large SMEs. The first contribution of this article is to present nine years of financial data of micro companies. The data itself is quite unique and not open data for everyone. On one hand, it gives further information about diverse and complex combinations of the profitability process in the small companies and how the MA systems affect it. Based on the contingency theory conception, this article finds that the management accounting practices such as a budgeting system or increased cost knowledge of the company influence the company's performance. Further, some of the contextual factors such as size and age of the company affected the company's performance in this study.

The slippery slope framework of tax compliance emphasizes the importance of trust in authorities as a substantial determinant of tax compliance alongside traditional enforcement tools like audits and fines. Using data from an experimental scenario study in 44 nations from five continents (N = 14,509), we find that trust in authorities and power of authorities, as defined in the slippery slope framework, increase tax compliance intentions and mitigate intended tax evasion across societies that differ in economic, sociodemographic, political, and cultural backgrounds. We also show that trust and power foster compliance through different channels: trusted authorities (those perceived as benevolent and enhancing the common good) register the highest voluntary compliance, while powerful authorities (those perceived as effectively controlling evasion) register the highest enforced compliance. In contrast to some previous studies, the results suggest that trust and power are not fully complementary, as indicated by a negative interaction effect. Despite some between-country variations, trust and power are identified as important determinants of tax compliance across all nations. These findings have clear implications for authorities across the globe that need to choose best practices for tax collection.

Purpose – The purpose of this paper is to investigate lender evaluations of start-up success in a sample of Finnish firms that are customers of a state-owned financial institution. The database allows the authors to examine how qualitative information, based on the personal history, firm-specific characteristics, subjective credit-analyst evaluations of business prospects, and market position impact firm performance. Design/methodology/approach – The data for this study was collected in 2003 and 2005 from the database of Finnvera, a state-owned financial institution. The authors employed logistic regression in the analyses, using t-test analyses to describe the sample before developing the different models. Findings – The results suggest that the lenders’ evaluations of the business prospects at the start are suitable predictors of good performance. However, the determinants of the actual firm performance (at t5) and business prospects (at t0) are, to some extent, different. The results confirm previous findings indicating that humans display fallibility because they have a tendency to overestimate less relevant cues and, conversely, underestimate the more relevant ones. Research limitations/implications – The study data includes only the customers of a state-owned financial institution; therefore, the results cannot be generalized across other financiers. Another constraint relates to the pre-selection bias, since this data excludes information on loan applicants who were rejected, which was not recorded in the lender’s files. Practical implications – The findings of this study provide lenders (especially state-owned financiers), policy makers, and entrepreneurs with clearer guidance regarding the important aspects of a firm’s period of establishment. For lenders, this may provide a step toward improving the quality of judgments. Originality/value – This paper is one of the few that sheds light on lender evaluations using non-accounting variables in order to examine their ability to predict firm performance, not failure, and to compare it with lenders’ evaluation. Another original contribution is that the data consists of the customers of a state-owned financial institution.

This article investigates, from an agency perspective, whether private family firms, compared to private nonfamily firms, are more tax aggressive. Moreover, for private family firms, the effect of the extent of separation between ownership and management on tax aggressiveness is studied. Additionally, we verify whether effective board monitoring moderates this relationship. Using Finnish survey data, results show that private family firms are less tax aggressive than nonfamily firms. For the subsample of private family firms, firms with a lower CEO ownership share are more tax aggressive whereas the presence of an outside director in their board mitigates this direct effect.

Purpose – This paper aims to focus on economic consequences of audit outcomes by investigating the concept of audit quality operationalised as seven components of audit benefits to owner-managers of small companies. Design/methodology/approach – The authors analyse survey data collected in 2013 from 642 small private companies above the audit exemption threshold in Finland. Findings – No significant association was found between engagement of a Big 4 auditor (proxy for audit quality) and any of the audit benefits tested. However, the results provide consistent evidence of a positive relationship between the owner-manager’s perception of the competence and reliability of the external accountant and the perceived benefits of audit. It was also found that companies which do not incorporate e-processes in the accounting system are more likely to value the internal control benefits provided by audit. Research limitations/implications – Small business surveys suffer from poor response rates. To some extent, the authors overcame this problem by using two focused sampling frames and reminders. Care must be taken when generalising the results, as the definition of “small” varies across jurisdictions. Originality/value – By focusing on small private companies, the research contributes to the audit quality literature. Contrary to studies of listed companies, the authors conclude that use of a Big 4 auditor is not a sufficient surrogate for audit quality in small companies. The authors go beyond aggregate measures of audit quality used in previous studies and identify specific audit benefits.

This study investigates how family ownership affects the usage of and the attitudes towards different funding sources in micro-sized, small and medium-sized private family and non-family firms. Our findings suggest that family firms are more likely than non-family firms to use trade credits, finance companies and owners as their sources of finance. We also find that family firms have more negative attitudes towards bank loans and trade credits, but more positive attitudes towards additional equity from current owners than non-family firms. The fact that our results on the usage of and attitudes towards trade credits differ suggests that the family firms in our sample may be forced to use short-term debt because more preferred sources are not available. Our results also suggest that attitudes towards different funding sources seem to follow pecking order theory.

This study investigates whether managerial ownership related agency costs are associated with the demand for audit quality in a sample of small private firms. The literature on audit quality suggests that firms with high agency costs are more likely to demand audit quality. Our database enables us to compare the demand for audit quality with three different measures: demand for Big 4 auditors and two types of certified auditors with strict professional requirements. The results show that an increase in managerial ownership decreases the likelihood that the firm will engage a Big 4 auditor or a KHT certified auditor but it does not have an impact on the demand for lower level certified auditors. Our findings also support previous studies that suggest a nonlinear connection between managerial ownership and the demand for audit quality in terms of Big 4 audits. This suggests that higher quality audits by Big 4 audit firms are used to overcome agency costs induced by information asymmetries between shareholders and managers. An increase in leverage, on the other hand, increases the likelihood that the firm will engage a lower level certified auditor as opposed to a non-certified auditor.

The authors present empirical evidence of how family ownership and control affect the demand for audit quality measured by audit firm size in a sample of small private firms. The results indicate that family-held or -controlled firms are less likely to use Big 4 auditors than nonfamily firms and that an increase in family ownership decreases the likelihood of a Big 4 audit. The results imply that the less concentrated family ownership is, the more need there is for outside control mechanisms because of higher agency costs. The results imply that family influence increases firms’ incentives to employ Big 4 audit firms, thereby increasing the credibility of their financial statements vis-à-vis outside stakeholders.

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 though 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 suggest that hanks 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. Introduction Corporate managers often complain about not being able to borrow enough capital at reasonable rates. Berger and Udell (1998) suggest that the constraints in raising external finance are even more pronounced for smaller firms. Storey (1994) further suggests that small firms find it difficult to obtain outside capital, and when they are able to obtain debt capital, it is at high interest rates. Economic theorists suggest that these problems are caused by market frictions, such as information asymmetries and agency costs. Previous literature suggests that the equity ownership structure of a firm affects the manager-shareholder conflict, and therefore also the agency costs related to these specific information asymmetries. The underlying thought in this literature (Galai and Masulis 1976; Jensen and Meckling 1976) is that when managers' stockholdings increase, management becomes more likely to make decisions consistent with the best interests of other stockholders at the expense of bondholders or other uninformed stakeholders. Consequently, over some level of common stockholdings by managers, larger stockholdings are associated with higher risk of outstanding debt and higher loan return premia. This relationship does not always have to be positive, however. First, as management's stake increases, its wealth becomes less well diversified, so management becomes concerned about the undiversifiable risk of its stake. Second, as management's stake increases, it can use its control of votes to protect its position (Morck, Schleifer, and Vishny 1988; Stub. 1988). As a result of these conflicting forces, both theoretical and empirical evidence, in Morck, Schleifer, and Vishny (1988) and McConnell and Servaes (1990), indicates that managerial ownership tends to affect shareholder wealth positively at low levels of ownership and may affect shareholder wealth negatively at higher levels of ownership. Even if the relationship between managerial ownership and shareholder wealth has direct implications on the relationship between managerial ownership and bondholder wealth, previous literature on this topic is scarce. The central idea behind these problems is that when companies use debt finance, they have an incentive to take risks that they might avoid when investing the owners' own money. Bagnani, Milonas, and Travlos (1994) suggest that at some level of managerial ownership managers have increased incentives to act in the stockholders' best interests and take risks that are potentially harmful to the bondholders' best interests. Their empirical results are well in line with these arguments, and suggest that managerial ownership increases bond return premia at medium levels of ownership, and lower these premia at higher levels of ownership. These findings suggest that managers who hold medium levels of corporate equity are more willing to take excessive risks than are managers who do not hold equity in the firm or managers who have a very large equity" stake. In practise, this can happen, for example, if the firm invests in projects that are riskier than the ones that it presents to its bank. Or alternatively, the firm can forego positive net present value investments with a low risk because it is not willing to reduce the overall risk level of its investments. …

This paper examines trade credit policies of small firms operating in a bank-dominated environment (Finland). We find that creditworthiness and access to capital markets are important determinants of trade credit extended by sellers. The level of purchases is positively correlated with the level of accounts payable. Larger and older firms and firms with strong internal financing are less likely to use trade credit, whereas firms with a high ratio of current assets to total assets, and firms subject to loan restructurings use it more. Negative loan decisions by financial intermediaries increase and a close bank-borrower relationship decreases the probability that a firm does not take advantage of trade credit discounts.

This study examines the use and determinants of covenants in Finnish small firms' loans. The results show that 72 of the 642 loan contracts examined include at least one covenant. Negative covenants are more common than affirmative covenants in our sample. We use loan characteristics, firm characteristics, and bank relationship variables to explain the use of covenants. Our results suggest that loans with real estate collateral are less likely to contain covenants than loans with other types of collateral. Larger firms are more likely to offer covenants, while the inverse holds for manager-owned firms. Firms with high corporate leverage, a high level of investments and a high sales growth rate offer covenants more often than other firms. Bank relationship length, changes of main bank and interbank competition also affect the use of covenants.

The aim of this paper is to investigate whether national culture explains previously observed cross-country variation in trade credit. Previous work suggests that national culture may close the gap between behavioral finance and “Law and Finance” in corporate finance. National culture influences on human values and is therefore expected to drive individual behavior. If we presume that people in charge of the company, represent the values of the nation in the country the company operates, we can predict the relationship between the financial decision making of the company and the national culture. Using firm level data from 35 European countries, religion and cultural factors from Hofstede and Schwartz, we provide new evidence on the determinants of the cross country variance in trade credit.Our results indicate that religion and national culture are associated with trade credit. We find that the levels of the trade credit are higher in the Catholic countries than in the Protestant ones. We also find that Hofstede’s cultural dimensions power distance and uncertainty avoidance are positively related to trade credit while individualism is negatively related to accounts receivable. Schwartz cultural orientation intellectual autonomy is negatively related to trade credit and conservatism is positively associated with accounts payable. Overall, our findings indicate that religion and the national culture are important determinants of trade credit management.

This study examines the determinants of the decision to raise currency debt. The results suggest that hedging figures importantly in the currency–of–denomination decision: firms in which exports constitute a significant fraction of net sales are more likely to raise currency debt. However, firms also tend to borrow in periods when the nominal interest rate for the loan currency, relative to other currencies, is lower than usual. This is consistent with the currency debt issue decision being affected by speculative motives. Large firms, with a wider access to the international capital markets, are more likely to borrow in foreign currencies than small firms.

Previous studies have suggested that the use of trade credit varies by country. This paper focuses on whether the rule of law or capital market development can explain observed differences in working capital levels in small and medium size enterprises (SMEs) from 13 EU countries. Our findings indicate that the legal score has a negative impact on working capital measured with the cash conversion cycle (CCC), working capital to total assets and accounts receivable. This implies that the working capital levels are lower and working capital management is thus more efficient in countries with safer legal systems and better investor protection. We also find that operating in a market-based capital system has a negative effect on the CCC. This implies that firms operating in countries with a market-based system as opposed to a bank-based system have better opportunities to manage their working capital. Overall, these findings indicate that country-level legal instruments explain much of the cross-country differences observed in working capital. The results also suggest that working capital practices and the extent to which trade credit is used are a product of the legal system and the financial systems in place in each country. If the financial system changes, the trade credit practices can also be expected to change.

Tablets compressed from 16 different mixtures of Avicel® grades PH-101, PH-102 and PH-200 were studied using a mixture design. The crushing strength, disintegration time and weight variation of tablets were determined after compressing with an upper punch force up to 30 kN. The particle size and density parameters of the powders were the most important factors influencing the tablet properties. The higher the amount of Avicel® PH-101 in the mixture, the stronger and more resistant to disintegration were the tablets. A high proportion of Avicel® PH-101 also resulted in greater weight variation. Increasing the proportion of granular Avicel® PH-102 and, especially Avicel® PH-200, in the mixture resulted in tablets with a lower crushing strength, shorter disintegration time and smaller weight variation. Increasing the compression force resulted in stronger and more slowly disintegrating tablets. Mixing with Avicel® PH grades was found to be worth trying in optimization of weight variation, strength and disintegration properties of tablets.

The aim of this study is to investigate whether reporting based on conditional conservatism differs in high versus low tax alignment countries in a sample of medium and large-sized private firms from 13 European countries. The results suggest that reporting conservatism is more likely to occur in high tax alignment countries and that this result only holds for firm-years with positive cash flow from operations. When it comes to negative cash flow from operations, we observe no differences in reporting conservatism of private firms between high and low tax alignment countries. Thus, the study provides a taxation-based explanation for conditional accounting conservatism in private firms.

This study investigates the role that board structure has on the demand for audit quality in connection with family ownership in a sample of private firms. In addition to this, we also shed light on whether ownership structure and board structure are substitute mechanisms in resolving agency costs in private family firms. Our main results show that the presence of outsiders on the board increases the demand for audit quality in the overall sample as well as in the presence of family ownership. Our results also confirm previous results and indicate that family firms are less likely to engage a Big 4 auditor even when we control for board structure. Additionally, we find that in a subsample of family firms the probability of choosing a Big 4 auditor decreases with an increase in CEO ownership and is higher in firms with outside boards. When we investigate the interaction between CEO ownership and outside boards, we find that role of outside boards is weaker when CEO ownership increases.

Tax aggressiveness is defined as downward management of taxable income through tax planning activities which can be legal or illegal or may lie in between. Given that taxes are an important cost for each firm, tax aggressiveness may be desired by its shareholders. In this paper, we investigate to what extent CEO ownership and governance (e.g. composition of the board of directors) affect tax aggressive behavior decisions in private family firms. More specifically, we extend prior knowledge by studying how board’s monitoring behavior may moderate the relationship between the CEO’s involvement in the firm and tax aggressive behaviour of the firm. The data, collected through a private survey, consist of 600 Finnish family and non family SMEs and is a panel with observations from the years 2000-2005. The model is estimated based on robust Ordinary Least Squares estimations including several moderating effects. In this paper, we find that private family firms appear to be less tax aggressive than private non family firms. Even though tax aggressive behaviour provides tax savings and allows the CEO to mask rent extraction (e.g. earnings management, perquisite consumption, excessive salaries…) to the detriment of other shareholders, the non financial costs being the possible reputation damage and loss of socioemotional wealth seem to outweigh the benefits. Within the group of private family firms, results show that family firms with a lower CEO ownership share are more eager to engage in tax aggressive behaviour. This result highlights the importance of the unique agency conflict between the CEO (agent and possibly principal) and (other) shareholders (principals) in determining family firms’ tax reporting. Finally, our results show that the presence of an outside director in the board of directors improves the monitoring effectiveness which reduces the tax aggressive behavior of those private family firms with low CEO ownership shares.

This paper focuses on the effect of managerial ownership on cash holdings in a sample of private family firms. Our results suggest that managerial ownership has a significant impact on cash holdings. Cash holdings are largest in the firms with no managerial ownership and lowest in the firms in which ownership and management fully coincide. However, low leverage seems to increase the need for cash holdings even in the firms in which ownership and management fully coincide. We also find weaker evidence on a nonlinear effect on cash holdings at intermediate levels of managerial stock holdings.

This paper is one of few that investigate the role of auditing in family firms. Our results suggest that family firms are less likely to use Big 4 audit firms than the non-family firms in our sample of small private Finnish firms. More specifically, we find that an increase in family ownership decreases the likelihood that a Big 4 audit firm will be engaged. Because of our Finnish database we are also able to differentiate between the demand for Big 4 audit firms, other highly qualified certified auditors and non-certified auditors. Our results show that family ownership has no impact on the demand for certified auditor services. Also, contrary to most previous studies on the demand of audit quality in private firms, leverage does not have a significant effect in our sample of small private family firms.

Growth is one tool for measuring the success and performance of fi rms. Although firms do not always have growth as their main objective, the ability to grow is an important aspect for them. Storey (1994) suggests that there are three categories of factors that infl uence the growth of small firms. The first group of factors is that of the entrepreneurs’ individual resources. These are factors that can be identified prior to the establishment of the business. The second group of factors is firm specific characteristics, such as the firm’s size, age, and legal form, and the third group is formed by the strategic choices made by the entrepreneur or the owners of the firm.This study investigates the impact that ownership structure and board composition have on growth in a sample of Finnish SMEs. Our study is one of the few that sheds light on how corporate governance and ownership structures aff ect the growth and performance of small firms. The data for the study was collected in Spring 2007, through a private survey. The Sampole consists of 600 fi rms. Observations include the years from 2000 to 2005.We find that both ownership structure and board structure are significant determinants of fi rm growth in our sample of small and medium sized Finnish firms. More specifi cally, the overall results suggest that managerial ownership decreases growth; whereas ownership by venture capital funds increases growth. Th e results also suggest that growth rates decrease when the number of top managers or the number of outsiders on the board increases. When we split the data into fi rms with less than ten employees and fi rms with ten or more employees, we find that ownership structure and board composition are more important determinants of growth in the sub sample of smaller firms.

This study investigates the interaction between audit quality and agency costs, when managerial ownership is used as a proxy for agency costs. The literature on audit quality suggests that firms with high agency costs are more likely to demand audit quality. Our database enables us to compare the demand for audit quality with two different measures; demand for Big 4 auditors and certified auditors with strict professional requirements. The results show that an increase in managerial ownership decreases the likelihood that the firm will engage a Big 4 auditor but it does not have an impact on the demand for certified auditors. Our findings also support previous studies that suggest a nonlinear connection between managerial ownership and demand for audit quality in terms of Big 4 audits. This suggests that audits by Big 4 audit firms are used in informationally opaque private firms to overcome agency costs. We also find that the probability of choosing a Big 4 auditor increases with an increase in firm size and the presence of foreign sales. An increase in leverage increases the likelihood that the firm will engage a Big 4 auditor only in the larger firms and in firms, in which management ownership is above 50%.

This study investigates the impact that ownership structure and board composition have on performance in a sample of Finnish SMEs. Our study is one of few that shed light on how corporate governance and ownership structures affect performance of small firms. Our results suggest that the ownership structure, in particular, affects both the growth and profitability of small firms. Firms with high managerial ownership levels exhibit higher profitability ratios, but have lower growth rates. We further find that firms with high Venture Capital Firm ownership ratios grow faster and are less profitable. These results can be interpreted to indicate that owner-managers are risk averse and that Venture Capital Firms seek investments with high growth potential. Our results on board structure suggest that board structure has little impact on the performance of small firms. The only significant result in this context is that firms with outside board members have lower growth rates and are less profitable.

PurposeThe purpose of this paper is to investigate the impact of gender on the usage of different funding sources in a sample of Finnish small‐ to medium‐sized enterprises (SMEs). The aim is also to embed the results into the country‐context, which is characterized by the long history of women's economic activity and bank‐based capital markets.Design/methodology/approachThe database includes variables on terms of credit for the firms' most recent loans and detailed information on the firms' banking relationships. The total number of firm‐year observations in the database is 3,519. The analysis is based on multivariate tests.FindingsThe funding patterns of women‐owned SMEs (WOS) and men‐owned SMEs (MOS) in the data are different: WOS are more likely to use additional equity investments by current owners as a funding source. They do so at least partly because of their positive attitudes towards this funding source. The results also contradict prior studies, which indicate that MOS have easier access to bank lending. The results suggest that there are no gender‐related differences in the use of bank debt. Also in contrast to prior studies, the paper finds no differences in firm size or profitability between WOS and MOS.Research limitations/implicationsThe results of study both confirm and contradict the results of prior research and the paper suggests that this is due to the context‐specific features of the Finnish labour market and the gender system as well as the bank‐centered financial markets.Practical implicationsConcerning the issues of gender and finance, policy makers and financial experts in any country should not uncritically rely on the research results arrived at in other countries.Originality/valueOnly a handful of studies have investigated issues of gender and finance in SMEs embedding the results into the country‐context.

This study investigates the determinants of start-up survival in a sample of Finnish firms. Our database allows us to investigate how qualitative information based on the personal history and characteristics of the owner, firm specific characteristics and credit analysts’ subjective evaluation of the business prospects and market position. As far as the results go, we find that an increase in equity to total assets increases the likelihood that the firm will survive. The results on gender suggest that firms with two different genders seem to have bigger likelihood to fail than firms operated by male owners only. Further, the results indicate that being employed prior to starting up a business increases the likelihood of survival. Finally, the lender’s evaluation of the demand for the firm’s products or services seems to be a good predictor of the likelihood of survival. When it comes to the results on how the lenders evaluate the firms’ business prospects, we find that an increase in the owners’ equity investment and the fact that the entrepreneur was employed before he/she started the business, both improve the credit analysts’ evaluation of the business prospects.

This study investigates the impact that family ownership has on loan availability and credit terms. Our study differs from existing literature by investigating the impacts of family ownership on loan availability and credit terms in a sample of small and micro Finnish firms. Our results suggest that loan availability becomes weaker when family ownership increases. Collateral requirements increase with management ownership, but contrary to previous studies on large, listed firms we find no effect on interest rates. These results suggest that there are agency costs involved with family ownership and that banks take this into account when lending to these firms. We also find that the impact of other attributes that affect loan availability of credit terms is different for family firms as opposed to non-family firms. Our results suggest that an increase in firm age improves loan availability and reduces collateral requirements only for the non-family firms. We also find that while an increase in profitability improves loan availability for all firms, it reduces interest rates and collateral requirements only for family firms. The results on relationship lending effects suggest that there are no differences in non-family and family firms. When it comes to bank market concentration, it seems that an increase in the number of local banks improves loan availability only for the non-family firms.

This paper examines the determinants of cash holdings in a sample of Finnish small and micro firms. Our results suggest that lending relationships and the share of managerial ownership both have a significant impact on cash holdings. The results on the relationship lending variables indicate that using multiple banks reduces the level of cash holdings. This suggests that firms with not so tight relationships with their banks have easier access to funds and therefore less need for cash holdings. The results also suggest that a similar effect can be achieved by building long-term bank-borrower relationships in cases where the firm has outstanding loans from one bank at the most. The results on managerial ownership variables indicate that the relationship between cash holdings and managerial ownership is cubic but that this result only holds for the larger firms in the sample and for the firms that borrow from two or more banks. Furthermore, our results show that larger firms, firms facing financial constraints and firms with high debt to assets ratios all hold more cash.

This paper examines the impact of firm level variables on the growth of small and micro firms operating in Finland. This study is the first one to investigate the impact that lending relationships have on growth. The results of our primary regressions show that close lending relationships enhance growth for all firms, but that only the larger firms in our sample benefit from more competitive banking markets. When we split the data into manufacturing and non-manufacturing firms, we find that only non-manufacturing firms benefit from close bank-borrower relationships. We additionally find that younger firms exhibit higher growth rates than older firms. Firm size seems to have a more complicated relationship with growth. Our results suggest that in the case of smaller firms an increase in size initially increases growth, but the effect is reversed after a certain level. For the larger firms with more than ten employees, we cannot reject Gibrat's law. Contrary to previous studies, we find that legal form is a significant determinant of firm growth only in the absence of more detailed ownership variables.

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.

This paper investigates the impact that bank switching has on loan availability and credit terms of small and micro firms. We are able to separate between different reasons behind the bank switch. Our data includes firms which have undergone bank change after the failure of their main bank, after the merger of their main bank and voluntary, firm initiated bank switches. The results are ambiguous. On one hand we find that bank switching makes it more difficult for firms to obtain a loan. On the other hand we find that interest rate margins on loans are lower for the firms that have switched their main bank. Small firms are more likely to be financially constrained after any type of bank switch whereas this likelihood increases for the larger firms in the sample only after a voluntary bank switch. Interest rate margins are lower for the larger firms after a bank merger but increase for the smaller firms after a merger.

This study examines the determinants of the decision to raise foreign currency denominated debt by taking advantage of a unique and comprehensive sample of private and public debt raised by 44 Finnish corporations. The results suggest that small firms borrow from domestic banks and insurance companies and in the domestic currency, while large firms rely on foreign banks and foreign currencies. Moreover, the results are consistent with the argument that hedging is an important determinant of the currency-of-denomination decision: firms in which exports constitute a significant fraction of turnover are most likely to raise currency debt.

This paper investigates whether there are differences in cosmetic earnings management between firms audited by male vs. female auditors in a sample of private Finnish firms. We find that earnings cosmetics is more likely to appear in firms audited by male auditors. Our results also indicate that private firms, too, do engage in cosmetic earnings management. Our results imply that gender diversity in the auditing profession may improve the quality of financial statements overall. This suggests that when selecting auditors, management and other stakeholders should pay attention also to the gender of the auditors that they engage or the gender distribution of the audit team. While this is the first study to combine earnings cosmetics and auditor gender, it is also the first one to document that earnings cosmetics takes place in private firms.

This study investigates the impact that family ownership has on loan availability and credit terms. It differs from existing literature by investigating the impact of family ownership on loan availability and credit terms in small and micro firms. Our results suggest that loan availability becomes weaker when family ownership increases. Collateral requirements increase with family ownership, but contrary to previous studies we find no effect on interest rates. These results suggest that there are agency costs involved with family ownership. We also find that the impact of other attributes that affect loan availability or credit terms is different for family firms. Our results suggest that an increase in firm age improves loan availability and reduces collateral requirements only for the non-family firms. We also find that while an increase in profitability improves loan availability for all firms, it reduces interest rates and collateral requirements only for family firms.

Tablet coatings of hydrophobic ethyl cellulose have been made more hydrophilic by the addition of a non-ionic surfactant, polysorbate (Tween) 20, to the film. As its content increased, so did the release of sodium salicylate from the coated tablets. With a certain content of surfactant and specific thickness of the tablet coat, zero order release kinetics were observed. Leaching of the polysorbate 20 occurred from all formulations. Scanning and transmission electron micrographs showed that the structure of the coats consisted of several layers parallel to the tablet surface. Polysorbate 20 was seen as small drops in some coats.