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Effect of Corporate Social Responsibility on Pricing of Small Business Loans: Evidence From Finland
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Author(s): Markku Vieru (University of Lapland, Finland)and Janne Peltoniemi (Centria University of Applied Sciences, Finland)
Copyright: 2021
Pages: 24
Source title:
Sustainability Reporting, Ethics, and Strategic Management Strategies for Modern Organizations
Source Author(s)/Editor(s): Ionica Oncioiu (Titu Maiorescu University, Romania), Sorinel Căpușneanu (Titu Maiorescu University, Romania), Dan Ioan Topor (1 Decembrie 1918 University, Romania)and Dana Maria (Oprea) Constantin (University of Bucharest, Romania)
DOI: 10.4018/978-1-7998-4637-6.ch009
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Abstract
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.
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