According to the doctoral dissertation of Antti Fredriksson M.Sc. (Econ. and Bus. Adm.), by analyzing the effects of the soft and hard information of bank-firm relationships, it is possible to develop innovative ways to control the uncertainty of information and the profitability of overall customer relationships.
It has been observed that soft and hard information are significant in bank-firm relationships. Differences between soft and hard information can be found in bank-firm relationships, particularly in the collection of information and the form of its processing: The collection and processing of soft information often takes place at a personal level. Hard information is both collected and processed automatically and in electronic form.
This research analyzed material comprising almost 2,000 observations of unique relationships and financial statement information, which enabled the diverse and comprehensive examination of the topic.
Soft information more difficult to process
When studying business loans, financial statement information is a natural source of hard information. Hard financial statement information creates a basis for the assessment of a company’s creditworthiness. The collection and processing of this information has largely been standardized, and its processing automated.
According to Fredriksson’s research, however, the collection of soft information has not been established in the same way. According to the nature of soft information, it is difficult to communicate to outsiders, because it is a ‘non-numerical input into the decision-making process’.
One solution for the improved exploitation of soft information is 'to harden’ it. This means that, soft information should be defined numerically based on relevant criteria.
Hardened soft information can be collected, processed and distributed electronically. This would produce many benefits in loan pricing and the management of customer relationships.
Soft information can ease uncertainty
The study finds that the technologies used in granting loans reflect the different levels of asymmetry of information between the parties involved in the bank-firm relationship.
By segmenting companies based on the technology used in granting loans, it is possible to find sources of loan pricing and the relationship value: technology emphasizing bank-firm relationships highlights soft relationship information, and technology emphasizing financial statement information highlights financial indicators.
Fredriksson’s research results highlight the significance of soft information in bank-firm relationships, and the study opens up new perspectives on their analysis. By combining relationship and financial statement information, it is possible to develop innovative ways to control the uncertainty of information and the profitability of overall relationships.
Antti Markus Fredriksson M.Sc. (Econ. and Bus. Adm.) will defend his doctoral dissertation "Soft and hard information in bank-firm relationships - The effect of relationship intensity and reporting conservatism on loan pricing and relationship value" on Friday 26 November 2010 at 12.00 at the University of Turku (School of Economics, Lecture Hall 16, Rehtorinpellonkatu 3).
Official opponent will be Professor Mervi Niskanen from the University of Eastern Finland and custodian will be Professor Hannu Schadéwitz.
Antti Fredriksson M.Sc. (Econ. and Bus. Adm.) was born in Turku in 1976 and matriculated from Puolalanmäki Upper Secondary School in 1995. He received his Master's degree from the Turku School of Economics and Business Administration in 2002. He also passed the APA examination of the Central Chamber of Commerce in 2006. He is serving as an Assistant Professor at the Turku School of Economics. His dissertation belongs to the field of Accounting and Finance.
Contact information for journalists:
work tel: +358 (0)2 333 9319, mobile: +358 (0)40 520 5711, e-mail: antti.fredriksson(a)tse.fi.
A picture of the doctoral candidate is available at http://utu.fi/vaittelijat/fredriksson_antti.jpg
The doctoral dissertation can be read at http://info.tse.fi/julkaisut/vk/Ae5_2010.pdf
Enquiries about press articles by e-mail to: viestinta(a)tse.fi. Dissertation sales: KY-Dealing Oy, tel. +358 (0)2 481 4422, e-mail: ky-dealing(a)tse.fi