Bank relationships and small-business closures during the Finnish recession of the 1990s

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Title: Bank relationships and small-business closures during the Finnish recession of the 1990s
Author: Kinnunen, Helvi ; Vihriälä, Vesa
Organization: Suomen Pankki
Series: Bank of Finland. Discussion papers
Series number: 13/1999
Year of publication: 1999
Publication date: 20.9.1999
Pages: 22 s.
Keywords: rahoitus; Suomi; suhdanteet; pkt; säästöpankit; pankkikriisit; lama;
Abstract: The paper examines the role of bank relationships in business closures during the Finnish economic crisis of the early 1990s.We utilise a unique panel data set of 474 small and medium-sized firms, for which we have standard accounting information and for which we can in addition identify whether the firm had a lending relationship with the most troubled part of the banking system, namely the Savings Bank of Finland and Skopbank.By estimating a logit model we find that, even accounting for the effects of liquidity, profitability, indebtedness, age and size, firms that had a lending relationship with the savings banks concerned were more likely to close in 1992 than other firms that year or the same firms in other years.Thus being a loan customer of these banks entailed greater risk for firms than having a lending relationship with other intermediaries only in 1992, which was the year the banking sector came to a head.The result lends support to the hypothesis that financial factors affect real outcomes not only through firm and household balance sheets but also through bank behaviour.
Rights: https://helda.helsinki.fi/bof/copyright


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