Small Business Borrowing and the Owner–Manager Agency Costs: Evidence on Finnish Data


  • Mervi Niskanen is professor of small business finance at the University of Kuopio. Her research interests include corporate finance, short-term financial management, relationship lending, corporate governance, auditing, international finance, as well as accounting and finance in family firms.

  • Jyrki Niskanen is professor of accounting and finance at the University of Kuopio. He has previously worked as a professor at the University of Tampere and the Helsinki School of Economics. His research interests include earnings management, information content of cash flows and earnings, international accounting standards, corporate environmental reporting, and relationship lending.

Mervi Niskanen, University of Kuopio, Department of Business and Management, PL 1627, 70211 Kuopio, Finland. Fax: 358-17-163-967. E-mail:


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 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.