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A Cross-Border Comparison of Crowdlending in Norway and Sweden : Regulations' impact on credit quality and credit risk premiums

Fivelsdal, Andreas Astrup; Søraas, Erlend Aasehaug
Master thesis
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URI
https://hdl.handle.net/11250/2777298
Date
2021
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  • Master Thesis [4207]
Abstract
Crowdfunding has experienced enormous growth in recent years, and the form of

crowdfunding that has grown most is crowdlending. A key reason for this growth is that

crowdlending has given small and medium enterprises easier access to capital. There are

currently no common regulations for crowdlending in Europe, and the regulations for

crowdlending in Norway and Sweden are different. However, the European Union has

recently passed a common regulation which will make regulations more equal between the

countries in the future.

This thesis investigates whether there are differences in credit quality among companies that

seek financing through crowdlending in Norway and Sweden. It also investigates if there are

differences in credit risk premiums cross-border. The results from these analyses could

provide insight into what will happen after the implementation of the common EU

regulations.

To analyze this, we construct a dataset containing information about companies that have

received funding through Norwegian and Swedish crowdlending platforms from 2017

through 2020. A range of OLS regression models are estimated to determine the relationship

between credit quality and country of issuance and between credit risk premium and country

of issuance. The empirical results demonstrate that the credit quality of companies receiving

funding through Swedish crowdlending platforms has been significantly higher than for their

Norwegian counterparts. They further show that credit risk premiums for loans issued

through Swedish crowdlending platforms have been significantly higher than for loans

issued through Norwegian platforms.

We argue that the main reason explaining the relatively poorer credit quality in Norway than

in Sweden is the current regulations. Specifically, we point to the peculiar Norwegian

investment limit of NOK 1 million per year. Further, we argue that the relatively lower credit

risk premiums in Norway constitutes an anomaly due to the same reason.

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