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Accessibility and economic growth : a study of spatial differences in forest industry financing in British… Newell, Allan Roy 1977

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A C C E S S I B I L I T Y S P A T I A L  AND  E C O N O M I C  GROWTH:  D I F F E R E N C E S I N  F I N A N C I N G  I N  F O R E S T  B R I T I S H  A  STUDY  OF  I N D U S T R Y  C O L U M B I A  b y A L L A N B.A., A  ROY  NEWELL  U n i v e r s i t y o f B r i t i s h C o l u m b i a , 1973  T H E S I S S U B M I T T E D T H E  I N  R E Q U I R E M E N T S M A S T E R  P A R T I A L F U L F I L M E N T FOR  T H E  OF  A R T S  D E G R E E  OF  i n T H E  F A C U L T Y  OF  ( D e p a r t m e n t  We  a c c e p t t o  T H E  t h i s  GRADUATE  o f G e o g r a p h y )  t h e s i s  t h e r e q u i r e d  U N I V E R S I T Y OF A u g u s t ,  (c)  A l l a n R o y  S T U D I E S  a s  c o n f o r m i n g  s t a n d a r d  B R I T I S H  C O L U M B I A  1977  N e w e l l , 1977  OF  In  presenting  an  advanced  the I  Library  further  for  of  this  written  shall  agree  at  that  it  purposes  for  freely  permission may  representatives. thesis  in p a r t i a l  the U n i v e r s i t y  make  financial  University  of  British  AugUSt  6,  1977  of  Columbia,  British  by  for  gain  Columbia  shall  the  that  not  requirements I  agree  r e f e r e n c e and copying  t h e Head o f  understood  Co^raphy  2075 Wesbrook Place Vancouver, Canada V6T 1W5  Date  is  of  for extensive  be g r a n t e d  It  fulfilment  available  permission.  Department o f The  thesis  degree  scholarly  by h i s  this  of  this  be a l l o w e d  or  that  study. thesis  my D e p a r t m e n t  copying  for  or  publication  without  my  i  ABSTRACT The term  availability  capital  investment  prerequisite questioned  of s u f f i c i e n t i s generally  f o r economic growth.  whether  friction  e n t r e p r e n e u r - b o r r o w e r s and negotiations It  was  significant, capital  that  then  s l o w g r o w t h and  officials various  The  a  A  low  at different  so t h e  to  r e v i e w and  financial  f a c t o r s which could  relationship,  key  during  were  of growth experiences  accessibility  literature  thesis  agreements.  handicap  show an  a  hampers  loan  distance  long  t o be  lending institutions  i f the study  for  present  of distance  intensive firms should  mediaries.  conceded  which p r e c e d e l o n g term  reasoned  finance  of  similar  a s s o c i a t i o n between  financial  inter-  discussions  with  institutions  intervene  i n the  h y p o t h e s e s were  suggested hypothesized  modified  accordingly. An of  fifty  interview  s m a l l and  distributed British formal by  Columbia.  computer.  the  forest  regions  a record  compiled  o f the  from t h e  questionnaires  In n e a r l y a l l c h e c k s  s a m p l e and  each  number  was  of  principals  industry  of  collected  on  comments made  interview. processed  for association, be  firms  province  of verbal  after  of s i g n i f i c a n c e could not  small  undertaken  In a d d i t i o n to data  questionnaires,  Information  was  medium-sized  over various  r e s p o n d e n t s was  tests  survey  by rigorous  a p p l i e d because  of meaningful  of  categories  ii within  variables.  records key  were u s e d  questions The  in  The  questionnaire  in a qualitative  of the  f i n d i n g s were t h a t  least  separation  transaction distance. constrained  were n o t  completely was  miles.  of finance,  institutions  but to  d i d not  was  require particular  exert  question  personnel  information  was  o f more i m p o r t a n c e  information  collection  the  relevance  of other  major  capable  posed of  the  by  The  factor affected profound  influence.  i n search  of  Financial concerning  o f whether  the  of i n t e r p r e t i n g such than  difficulties  distance.  The  the  British  of  thesis  hypotheses i n the  changes a f f e c t i n g  industry.  institutions  information  had  examines  a  of  institutions,  were a p p l i e d .  the  friction  distance  overcome d i s t a n c e  effort  i n v e s t m e n t s and  that  at  longer  "by d i s t a n c e .  institution  forest  of  suggested  suggested  unaffected  greater  For  evidence  that a c c e s s i b i l i t y  i f sufficient  proposed  was  with  difference  intermediaries,  250  evidence  evidence  B u s i n e s s m e n were a b l e credit  the  little  "borrowers o f c a p i t a l more t h a n  indirect  patterns  there  limited  although  conclusion  than  was  firms  financial  less  distances The  interview  appraisal of  there  of s i m i l a r  from  for distances  and.  study.  growth experiences  spatial  data  context  Columbia  i i i TABLE  O F CONTENTS  Page LIST  OP T A B L E S  v  LIST  OF F I G U R E S ,  ..  vi  Chapter 1.  INTRODUCTION  1  INTRODUCTION SCOPE 2.  SPATIAL A  TO T H E S I S  PROBLEM  1  OF T H E RESEARCH ASPECTS  CRITICAL  4  OF THE FINANCIAL  REVIEW  SYSTEM:  OF THE LITERATURE  INTRODUCTION CANADIAN  14  G E O G R A P H E R S ON T H E F I N A N C I A L  SYSTEM OMISSIONS Lending  *  15  IN THE LITERATURE  28  on  Character  28  Officers  29  Competition  30  Personality  Weight of  of  Loans  Inter-institution SUMMARY 3.  31  METHODS O F D A T A  COLLECTION  INTRODUCTION THE  14  INTERVIEW  THE INTERVIEW CONCEPTUAL  35 35  SURVEY  36  PROCEDURE  39  BREAKDOWN O F T H E  QUESTIONNAIRE SUMMARY  40 57  iv Chapter 4.  Page PRESENTATION OP SURVEY RESULTS  60  INTRODUCTION  60  QUANTITATIVE ANALYSIS OP STANDARD QUESTIONNAIRES  60  Basic  Components o f t h e A n a l y s i s  Logic o f the Quantitative Phase Interpretation of  60  Analysis 63  of Statistical  Results  Crosstabulations  Summary  64  o f Problems  Q U A L I T A T I V E SURVEY  69  FINDINGS  70  Introduction General Results  70 f o r Various  Institutions Overview o f F o r e s t SUMMARY 5. SUMMARY BIBLIOGRAPHY APPENDIXES  70 Industry  Changes  ...  90 98 102 112 116  V  LIST OP TABLES Table  Page 4.1  Level of Significance of Test Hypotheses, and Strength of Association, for Crosstabulations of Survey Variables .. 67-68  4.2  Crosstabulation: Whether Two Banks Were Ever Approached with Same Loan Proposal, versus Highway Mileage to Nearest Branch Bank  73  Crosstabulation: Outcome of Approach to Industrial Development Bank for a Loan on Most Recent Expansion Project, Versus Distance to Nearest IDB Office..  82  Crosstabulation: Whether Firm Had at Any Time Discussed Business Loans With O f f i c i a l s of Roynat Ltd.. Versus Regional Center Closest to the Firm ...  86  Crosstabulation: Whether Firm Approached a Finance Company for a Loan on Latest Expansion Project, Versus Highway Mileage to Nearest Chartered Bank Bran ch  88  4.3  4.4  4.5  vi LIST OF FIGURES Figure  i  Page  1.  Simple Model of C a p i t a l Market  2.  Distance Components i n Chartered Banking Operations  7 22  vii ACKNOWLEDGEMENTS I would  like  t h e many i n d i v i d u a l s project.  Firstly,  for h i s patient  to take t h i s  who h a v e s u p p o r t e d  I am g r a t e f u l  studies.  generous  w i t h h i s time  t o Dr. Robert  and s u p p o r t . time  i n an i n t e r v i e w , e s p e c i a l l y  the set i t i n e r a r y  Westwood b o t h  example the  to explain  Danny, who have well  Finally,  shared  this  protracted effort.  t o commend busy  schedules who that  I am g r a t e f u l t o  I must  f o r the personal acknowledge  o w i n g t o my w i f e Mary E l l e n cheerfully  my  very  those  and son  the f r u s t r a t i o n s as  a s c a r r i e d many o f my r e s p o n s i b i l i t i e s  during  North  details  f o r h i s a d v i c e and a l s o  he has p r o v i d e d .  g r e a t debt  I wish o u t from  were b e y o n d my p r e v i o u s e x p e r i e n c e . Bob  in this  D r . K. G. D e n i k e was a l s o  t h e many b u s i n e s s m e n who t o o k  went b e y o n d  me  a d v i c e and a s s i s t a n c e t h r o u g h o u t  graduate  to p a r t i c i p a t e  o p p o r t u n i t y t o thank  f o r me  1  Chapter INTRODUCTION This affects loan  thesis  TO THESIS  questions:  The. t h e s i s  does d i s t a n c e  loans  from  institutions? procedures  only  when t h e y  want  expansion  s e e k s a n s w e r s t o two b a s i c c o n s t r a i n businessmen  t h e most a c c e s s i b l e  Secondly,  used  PROBLEM  examines whether p h y s i c a l a c c e s s i b i l i t y  private entrepreneurs  capital.  capital  1  to request  financial  does d i s t a n c e a d v e r s e l y  by f i n a n c i a l  institutions  affect  f o r granting  loans? An mean  that  spatial  topic.  affirmative capital  answer t o e i t h e r  availability  variations  i n economic  T h e r e were  compelling  Firstly,  political  causes  development. reasons  f o r the c h o i c e o f  regional disparities  thirty  development  unemployment  are a  simmering  Despite  a variety of  of chronic  and low incomes have s t u b b o r n l y p e r s i s t e d .  pressure  resulting  in a shifting  government  years.  programs, areas  Political  A  i s a f a c t o r which  would  i s s u e w h i c h h a s commanded p u b l i c a t t e n t i o n i n  Canada f o r o v e r regional  question  d r i v e s forward  the s e a r c h  kaleidoscope  f o r solutions,  of different  federal  programs. second  relationship development  reason  between is still  f o r concern  capital  i s that the t h e o r e t i c a l  markets and r e g i o n a l  the subject o f unresolved  controversy.  2 The  proponents  model o f f e r "(b)y  any  United  one  For  determinants world  r e g i o n a l economic  since they standard,  simply  the  i s almost, a p e r f e c t  objected  opinions.  important  view,  reasonable  States  writers  o f an  capital 1 one."  to that a s s e r t i o n  example,  and  Richardson  of i n t e r - r e g i o n a l  a r e , however, w i d e l y  assumed  growth that  market  in  However,  the  other  offered contrasting  wrotei  capital  "(t)he  flows  a t odds w i t h  i n the  real  the a b s t r a c t p  assumptions o f the p e r f e c t l y Another economist agreed:  mobile  capital  market."  "Y/hether i/ohg-term r e g i o n a l g r o w t h m o d e l s s h o u l d be b a s e d on t h e a s s u m p t i o n o f a p e r f e c t c a p i t a l m a r k e t o r w h e t h e r t h e r e i s some more d i r e c t c a u s a l r o l e f o r t h e c a p i t a l m a r k e t i n r e g i o n a l g r o w t h has n o t b e e n c r i t i c a l l y examined. Whether o r n o t c a p i t a l m a r k e t s e x h i b i t s i g n i f i c a n t r e g i o n a l c o m p a r t m e n t a l i z a t i o n , and i f s o , the e x t e n t to which t h i s i n h i b i t s growth i n p a r t i c u l a r r e g i o n s , remain unanswered q u e s t i o n s . " ^ The clearly It  unsupported  indicate  is likely  such  of  the  argumentation to  actual  study  could benefit  thesis  was  hypothesized  designed  since a f i e l d  study  Canadian  to a v o i d compared  from  government  for theoretical  i m p e r f e c t i o n s i n the study  documentation.  classeveral capital  unproven the  hypotheses  experiences.  The constrained capital  present  counter-assertions  though concrete  have w a i t e d  The  spatial  m a r k e t , and  f o r case  r e s e a r c h , even  could not  sifications. types  the need  t h a t government p o l i c y  directed  actions  a s s e r t i o n s and  first by  loans  the from  hypothesis real  was  effects  financial  t h a t businessmen of distance to  institutions  are  request  in their  vicinity.  3 Because only  individual  a limited  businessman  institutions  range of p o s s i b l e c a p i t a l  should  have a c c e s s  of i n s t i t u t i o n s  for a  available.  i n t e r e s t s are  exist  His  sufficient  institution limits there  full  compete  i s a greater  economic  served.  The  serve  loan  needs,  complementary  range of s e r v i c e s to also best  small that  served  particular  for loans.  chance  and  Where p o o r  set of  types be when  type  second  financial  requests  access  institutions,  h i s c a p i t a l needs w i l l  result  w o u l d be  are  hypothesis  was  institutions  adversely  for evaluating  a f f e c t e d by  uncertainty  risk  loan  distance.  about  loan  institution  s e c u r i t y , or  space would d i s t o r t  in  reduce  may  access,  remain at  high  e i t h e r charge a  the  scale,  request  requested  o f g r o w t h , by t o e x p a n d as  levels  higher  loan.  o c c u r r i n g s y s t e m a t i c a l l y over patterns  to  time  making  fast  as  more a c c e s s i b l e . two  h y p o t h e s e s r e i n f o r c e one  predicted result the  refuse  to  Thus,  Given poor  at reduced  f o r remote b u s i n e s s e s  The the  have t o  just  and  those  requests  a loan  of  harder  effects  may  Any  it  these  institution  increasing distance.  premium, o f f e r  greater  the  procedures  a b o u t r e p a y m e n t becomes more d i f f i c u l t  with  by  that the  uncertainty  the  be  retarded  required  and  there  of  information  collect  a  growth. The  by  to  numbers o f any  a businessman to a  inadequately  used  to  specialize  availability  being of loan  significant capital.  another,  spatial The  with  differences  relative  accessibility predicted  of various  In f a c t ,  hierarchy  have  i n terms  gressively services  and  smaller  economic  closely  follows  centers  s e r v i c e s and t h e most  institutions.  In pro-  both the range  of financial  o f each  type  A c c o r d i n g t o the hypotheses presented  growth  will  be s l o w e s t i n r e m o t e  areas  communities.  The  foregoing  which p r e d i c t e d  financial  financial  distance  a crude model \  experiences, depending  The p u r p o s e  and j u s t i f y  field  formed  of a business  institutions.  was t o e l a b o r a t e collect  hypotheses  certain  upon t h e r e l a t i v e  then  of financial  centers,  of financial  Metropolitan  a n d t h e number o f i n s t i t u t i o n s  smaller  from  largely  distribution  places.  o f competing  decrease markedly. here,  their  of central  the w i d e s t range  depth,  can be  from knowledge o f t h e d i s t r i b u t i o n  institutions. the  locations  this  information  initial  enterprise o f the t h e s i s model,  and  to permit i t s evaluation.  SCOPE OF THE RESEARCH Various study. for  constraints  Foremost  collecting  was t h e l i m i t e d  field  seemed t o r e q u i r e  information.  original  be a n e c o n o m i c a l p h a s e . it  of British A sample  be  derived  the scope  of the  time and funds  available  Although the t o p i c  d a t a , by n e c e s s i t y  To f a c i l i t a t e  was d e c i d e d t o r e s t r i c t  province  limited  data  this  would  collection,  the study to w i t h i n the  Columbia.  w h i c h would  from d i f f e r e n t  test  the h y p o t h e s e s had t o  types of locations;  both  from  5 areas  a c c e s s i b l e to  isolated  places.  lishments in  order  from  had to  large urban  Also,  or  expand,  high  reasoned overhead  Preliminary  i n d i c a t e d that very  likely  be  it  p r a g m a t i c t o draw t h e  was  immune f r o m  w h i c h had  the  showed t h a t  fulfilled  most o f t h e  information collected the  forest  those Two  had  to  for fixed  be  capital  the  corporations  would  Therefore,  from i n d u s t r i e s  and  medium-sized  industrial Columbia  financial  The  and  firms.  commercial  forest  industry  original  experiences  medium p r o d u c i n g  d e c i s i o n was  industry  firms,  institutions  was  therefore  companies  to  made t o  the  collect  in  question  study  was  of  information  which  narrowed,  since  a c t i v e i n f o r e s t r y l e n d i n g were r e l e v a n t .  describes  in detail  selected  financial  affected  by  terms  small  funds  industry.  forest  financial  they  more  estab-  a p p r a i s a l of  sample  British  s m a l l and  Once t h e from  costs  requirements.  concerning  from  that  large  of various  the  sampled  predicted effects.  a l a r g e number o f  Consideration sectors  that  from  s t r o n g need t o borrow  i t was  equipment.  hypotheses  ensure  demonstrably  industries with  assets  to  c o m m u n i t i e s and  to  Chapter  lending operations could  be  However, b e f o r e  m a r k e t " and  closer definition  the  institutions  distance.  "capital  how  "financial  i n d i c a t e how  of  adversely  proceeding,  the  institution"  they  only  p e r t a i n to  require this  thesis. The as  shown  c a p i t a l m a r k e t has  schematically  three  in Figure  1:  basic saving  components, groups,  6 borrowing groups, institutions  and  perform  financial  institutions.  intermediation  or  The  brokerage 4.  functions, general  or provide  function  efficient  o f the  allocation  borrowers of v a r y i n g The  and  indirect  of  funds  small  the  intermediary  are  offered  intermediaries  1  or  facilitate  savings,  involves,  In  amongst  groups.  receive  securities  ready  part  of  when t h e  In r e t u r n  issue primary  both  against  Indirect  second  is fulfilled  to borrowers.  borrowing u n i t s  issued  facilitate  The  in  saving units  claims  funds.  forms t o  firstly,  saving units  return,  financial  function  have b e e n d i s p e r s e d funds,  function  from u b i q u i t o u s  in various saving  good,  A  credit-worthiness.  r e c e i v i n g the  a c c e p t a n c e by  market i s to  of a scarce  amounts.  securities,  counselling.  capital  intermediation  collection large  financial  financial  funds  for  securities.  the  7  Figure 1  SIMPLE MODEL OF CAPITAL  MARKET  Saving Sector  Supply: Public, Business, Government  Borrowing Sector  Demand: Public, Business, Government  1  Symbols: Flow of funds Issue of Primary Securities Issue of Indirect Securities  8 The i n t e r m e d i a t i o n saver d i r e c t l y risk  purchases a primary  and y i e l d .  This  occurrence  course not a l l savings intermediaries. in  to invest  inconvenient, saver,  incentive to  fully  Since  i s common s i n c e into  intermediaries  since  of  financial  create  efficiency  c e r t a i n advantages permit  unknown o r u n a c c e p t a b l e  between  induces  those  them  so much r e a l  to the i n d i v i d u a l  l a c k i n g investment  financial  institutions  to tap a l l p o s s i b l e  a l l o c a t e these  financial  security of satisfactory  funds p r o f i t a b l y i n s i t u a t i o n s whidh a r e  particularly  Competition  i s b y p a s s e d when a  are channelled  However,  the c a p i t a l market  them  function  funds  capital  intermediaries  into suitable  investment  flows  expertise.  and t h e  profit  savings  and  investments. through  a r e o f c e n t r a l concern  them,  to the  thesis. The b r o k e r a g e constraints and  a m a r k e t where  However,  brokerage  large  completely, real  and  securities, can  take  excluded  from  the  study.  b o r r o w i n g means a r e n o r m a l l y  well-established. savings  may  bypass the f i n a n c i a l  o r motor v e h i c l e  accept  installments  seller  may  instead  have e x p e r t i s e and  place  o v e r a l l importance,  a s shown by P l o w A i n F i g u r e  estate  regulations  were  of primary  exchange and r e s a l e  their  t o use t h i s  Invested  in  despite  functions  Businesses able very  o v e r c o m e s t i m e and  f o r b u y e r s and s e l l e r s  provides  place.  function  securing  1.  F o r example,  sales, the s e l l e r  of a f u l l  may  c a s h payment.  i n credit evaluation, the loan  sector  The  government  to safeguard h i s  9 investment. involved, from  Particularly  the  those  services provided  of f i n a n c i a l  non-institutional the  terms  studying  when a b u s i n e s s  of  credit  "...given  risk  place  the  the  very  his  projects  his  own  be  that distance  a number o f  financial detailed  in  willing distance  Individuals invest in  and  could  be  called  study  their  took  study  adversely  was  to  affects  evaluate financial  Therefore,  there  f o r e s t r y companies o f v a r y i n g  w h i c h had  institution.  field  operations.  dealt with  T h e r e was  of p a r t i c u l a r  types  each type  of  little;,purpose of  degree  in  intermediaries  f o r e s t r y i n v e s t m e n t s were s i g n i f i c a n t .  choose which i n s t i t u t i o n s study  environment."  o b j e c t i v e of the  of a c c e s s i b i l i t y  unless  f a r removed  be  lenders??.  hypothesis  to  would  investments probably  intermediaries' lending had  t h e unknown, i t  who  immediate v i c i n i t y ,  private  i s noteworthy:  people a t t a c h to  s o p h i s t i c a t e d saver  from  in their  One the  that  t o make d i r e c t  "local  of  foregoing  finance  funds i n investments  or experience able  from  difficulty  b a s i c d i f f e r e n c e between t h e institutionalized  to  were e x c l u d e d  because o f the  f i n a n c i n g and  only  However,  them s y s t e m a t i c a l l y . A  is  be i n d i s t i n g u i s h a b l e  intermediaries.  sources  of reference  may  dealership i s  place,  were r e l e v a n t  j u d g e m e n t and  a priori  before  the  knowledge  To field was  applied. Of chartered  those  types  selected for preliminary  b a n k s were deemed t h e most  important  study, single  '10 type  of  funds  financial  from  limited  short  intermediary. term d e p o s i t s  capability  have d e m o n s t r a t e d lending; 1967  as  o f the  d i d the  type  Examples  grants  of intermediary  by  or loans  obtain  nevertheless  in longer  rate  term  ceiling  with  expected  deposits.  t o be  economic development  businesses  can  a  corporations  governments t o industries.  extend  The  Economic Expansion  federal  (DREE)  gives  jobs  in designated  regions.  Also,  the  Development  Bank (IDB)  i s an  important  lending institution,  request  to o b t a i n  were  prominent.  a s s i s t a n c e t o i n d u s t r i e s p r o v i d i n g new  Industrial  the  assisted this  lending institutions  to q u a l i f y i n g  publicly-financed  unable  they  probably  many p r o v i n c i a l  through expansion federal  interest  Bank A c t  Department of R e g i o n a l similar  lending,  sponsored  i n c l u d e the  established  the  banks  have i n h e r e n t l y  p o p u l a r i t y o f term  Government second  and  increasing interest  Removal o f  revision  trend,  f o r term  Although  medium and  credit  from w h i c h  long  term  elsewhere under  small  loans i f  reasonable  conditions. Common t o g o v e r n m e n t the  absence  objective. or  of p r o f i t Instead,  maximization they  commercial development  provide  capital  intermediaries extent  sponsored  attempt  as to  the  deemed a d v i s e a b l e .  prime  foster  in particular  when i t i s j u s t i f i e d , are unable  institutions  industrial  purpose  and  to  private  or u n w i l l i n g to lend The  corporate  regions  but  is  i s not  to to  the enrichen  11 entrepreneurs  a s much a s i t i s t o p r o v i d e  through d i r e c t By  and i n d i r e c t  employment,  examining whether s p a t i a l  availability lenders,  exist  despite  the present  evaluation  Term institution  differences in credit  could  lending  finance  are  expected  t o be r e p r e s e n t e d . sold  o b l i g a t i o n s which a f f e c t Canadian  consortiums, these  examples  of this  a n d may o b t a i n  i n the c a p i t a l  chartered type  clients  finance  institutions,  except  consumer f i n a n c e  that  companies  portfolios.  have founded  their  Usually  For  manufacturers  intermediaries  products.  finance  o f f from  field.  and equipment  such f i n a n c i a l  can a r r a n g e  affiliated  truck  p a r t i a l l y to  equipment  dealer-  f i n a n c i n g f o r a s a l e through the  commercial  involved.  lending  Some c o m m e r c i a l  i n the manufacturing  e x a m p l e , many l a r g e  be  t h e y u s u a l l y have s u b s t a n t i a l  companies a r e l u c r a t i v e s u b s i d i a r i e s spun  ships  referred  companies would a l s o  a r e s i m i l a r t o t h e newer term  market  banks.  b a n k s o r bank  These l e n d e r s  help  term  of institution  chartered business  market,  banks.  Commercial  parent  practical  By o b t a i n i n g  are freed o f short  s u b s i d i a r i e s o f domestic  from  be v i e w e d a s a  c o m p a n i e s were a n o t h e r t y p e o f  s p e c i a l i z e d lenders  Several  o f government  institutions.  f u n d s v i a bonds o r d e b e n t u r e s  creditor  et cetera.  o f the r a t i o n a l e and e f f e c t i v e n e s s o f  government-sponsored  these  taxation,  the operation  thesis  spin-off benefits  finance  company, o r i f n o n e ,  12  through another maintains  commercial  finance  company  which  a c l o s e working r e l a t i o n s h i p f o r mutual  advantages. In  the f i e l d  study,  f o r e s t r y f i r m m a n a g e r s were t o  be q u e s t i o n e d  regarding  the  common t y p e s  foregoing  answers, and  and from  other  would  t h e i r f i n a n c i n g experiences of institutions.  information  characteristics  Prom t h e  on t h e r e l a t i v e l o c a t i o n  of the businesses,  be made o f t h e h y p o t h e s i s  that  financial  inter-  lending.  I t was n o t e d  earlier  expecting  institutions  t o be a f f e c t e d b y d i s t a n c e  pective  borrower. The  detail the as  next  This a c t i v i t y chapter  w e l l as r e a l that  business  business  that the r a t i o n a l ef o r  be c o l l e c t e d  presents  and r e v i e w s r e l e v a n t  information  way,  need  in their  evaluation  are constrained  information  by d i s t a n c e  an  mediaries  that  with  concerning  was  the pros-  i s a f f e c t e d by d i s t a n c e . the hypotheses i n  literature.  The n a t u r e  of  r e q u i r e d by i n s t i t u t i o n s . i s examined, world  f a c t o r s which a c t i n the opposite  i s , to reduce borrowing  the f r i c t i o n  patterns.  of distance i n  13 REFERENCES 6. H. Borts and J . L. Stein, "Regional Growth and Maturity in the United States; A Study of Regional Structural Change," Regional Analysis, ed. L. Needleman (Baltimore: Penguin Books,* 1968), pp. 159-197. 2 Harry W. Richardson, Elements of Regional Economics (Baltimore: Penguin Books, 1970), p. 104. ^Mahlon R. Straszheim, "A Introduction and Overview of Regional Money Capital Markets," in Essays . in Regional Economics, eds. J . R. Meyer and J . F. Kairi (Cambridge: Harvard University Press, 1971), pp. 218-239. The pp. the pp.  "*This discussion owes much to E. P. Neufeld, Financial System of Canada (Toronto: MacMillan, 1972), 1-33; also see H. H. Binhammer, Money, Banking and Canadian Financial System (Toronto: Methuen, 1972), 153-65.  -*Jj. E. Davis, Jonathon R. T. Hughes and . : -7, .': Duncan M. McDougall, American Economic History (Homewood: Irwin, 1965 ed), p. 223.  14  Chapter 2 SPATIAL ASPECTS OF THE FINANCIAL SYSTEM: A CRITICAL REVIEW OF THE LITERATURE INTRODUCTION The purpose of the second chapter i s to report more of the "background considerations which affected the interview survey and subsequent analysis.  The  question  to be answered from this chapter was whether the i n i t i a l thesis hypotheses were compatible with descriptions and conclusions of other writers on the subject. The findings, from the literature review and first-round discussions with specialists in finance and the forest industry, were that a case could be made for the thesis hypotheses, but support was not unanimous. This stage of the work was d i f f i c u l t because so much of the literature on finance is essentially descriptive and even laudatory in tone (the view from within). Actually, very l i t t l e objective analytical work has been done in Canada. Given the lack of a close-knit body of relevant research, i t was necessary to compare the thesis problem with concepts abstracted from a wide range of sources,, Although the diversity of source material broadened the perspective from which the problem was viewed, the  15 t r a d e - o f f was  t o h a v e a much l e s s c o n c i s e  proposal  t h a n was  sections  o f the  hypotheses  initially  present  visualized.  chapter  were e x p a n d e d .  collecting CANADIAN  relevant  Chapter Three  following the  original  shows how  into a  the  design  data.  GEOGRAPHERS ON  G e o g r a p h e r s do  The  i n d i c a t e how  e x p a n d e d h y p o t h e s e s were i n c o r p o r a t e d for  re^searchj  THE  not  FINANCIAL  seem v e r y  SYSTEM  interested in  the  i topic  of economic development.  then,  that  system  to  literature  relating  I t i s not the  surprising  domestic  r e g i o n a l economic development  financial  i s almost  non-  2 existent.  Fortunately,  Donald  Kerr  was  e x p r e s s i n t e r e s t i n the p u r p o s e was He  to  there the  have been  first  (for  e.g.,  primary assets  system.  f u r t h e r e x p l a i n urban  and  large  functions,  growth  s c a l e lending.^"  trade  I t was  in  recognized  defined  market  whether  the  s e c t o r i n g o f m a r k e t s was  due  of distance  or merely a d m i n i s t r a t i v e  decisions  institutions. signalled of the  By  using  employment  his interest in direct  financial  sector  and  and  financial  service functions  However, K e r r  primary  services  general  areas.  provided  within  d i d not to  that  wellspeculate  real  statistics,  growth caused  l i n k e d support  to  processes.  branch banks),  s u c h as  are  Kerr's  financial  those of neighbourhood  financial  exceptions.  Canadian geographer •5  financial  d i s t i n g u i s h e d between g e n e r a l  several  of  on  effects the  Kerr by  expansion  industries.  16 This  f a c t o r undoubtedly  centers  and  intermediate-sized  Insofar Kerr's from and  article  his  distance  ancial loan  was  on  that  provocative, made on  as  failure  acceptance  i s important  to  l a r g e r urban  regional  centers.  i t a f f e c t e d the  present  disappointing.  The  to  speculate  on  the  financial  system,  thesis  problem,  difficulty  various  stems  e f f e c t s of  space  (or a  too-ready  space i s i r r e l e v a n t ) . T h i s  shortfall  r  since  possible  i t meant t h a t no  indirect  comments  r e g i o n a l impacts  sector - particularly  from u n e v e n  could  is  be  of the f i n -  availability  of  capital.  i Another system  Canadian  i n more d e t a i l  geographer  Code t r a c e d  main  centers  t h e i r modern  financial statue.  His  i n terms o f the Code s u g g e s t e d  spatial  evolution  of  the  from  p u r p o s e was  geography o f h i g h e r - l e v e l f i n a n c i a l largely  the  financial  in a doctoral dissertation.  a q u a l i t a t i v e approach, Canadian  studied  need  evolution  their  of  the  beginnings  to e x p l a i n  to  "the  decision-making,  for financial  intelligence."^  f a c t o r s which helped  centers  Using  i n which h i g h e r  explain  the  level  decision-making takes p l a c e j " ( 1 ) The r e l a t i v e s i z e s o f t h e i n d i v i d u a l f i n a n c i a l c o m m u n i t i e s a t any g i v e n t i m e . (2) The n a t u r e o f t h e i n v e s t m e n t o p p o r t u n i t i e s w i t h which the f i n a n c i a l communities are d e a l i n g , and; (a) whether t h e r e i s a g r e a t d e a l o f u n c e r t a i n t y i n v o l v e d i n the i n v e s t m e n t s . (b) w h e t h e r t h i s h i g h u n c e r t a i n t y i n d u s t r y i f ( s i c ) l o c a l i z e d in a f a i r l y narrowly defined region. (3) The mass o f i n f o r m a t i o n r e q u i r e d i n r e l a t i o n to i t s value.  17  (4)  The i n h e r e n t n e e d f o r u n c e r t a i n t y r e d u c i n g information. ( 5 ) The s a v i n g s i n c u r r e d from agglomerating. (6) S u s t a i n i n g power i n t h e l o c a l economy, y ( 7 ) The s t a t e o f t h e c o m m u n i c a t i o n s s y s t e m . " Code v i e w e d than  the  have  i m p l i c a t i o n s f o r the  small  present  finance  forest  predicts  industry  must be  t r a n s f e r r e d from  forestry  investment  transfer  i s as  of  state  capital.  This  of  take  means t h a t  rural  that  site  there an  present  chartered  can  If  be no  center, To  thesis. with  in  The  internal  thesis, t o any of  below.  rephrased  investments require the  sharp  partial  actual  be  the  friction  banks i s ' d i s c u s s e d  place near  present  of the  hypothesis  r e l a t i o n s h i p could  industry  to  lending  retiring  well with  in that lenders  the should  f o r e s t r y investment  success.  r e l a t i o n s h i p i s complex.  long distances  small  larger center.  lending,  high value  financial  larger center.  r e l a t i o n s h i p a l i g n s very  third  in a  proposed  high uncertainty  The  first relationship  the  good a c c e s s i b i l i t y  w h i c h has  for  process  Code's h y p o t h e s i s  hypotheses o f the require  The  finance  whole d e c i s i o n - m a k i n g  that high uncertainty to  from  as  o f the  second  decisions  it  of  i n t o the  affecting  decision-making The  the  simple  to those  consistency  availability  made i n t h e  such r e s u l t ,  contrast  above r e l a t i o n s h i p s  i s a possible choice  achieve  perspective  However, t h e  l o c a t i o n between a l a r g e o r  d e c i s i o n w o u l d be  of distance  a different  companies.  that i f there  decision-making the  thesis.  from  investments  away b e c a u s e  the  can  Basically,  take  place  information  transfer  18 costs  are  value.  more n e g l i g i b l e  The  than the  merit  others,  o f bank l o a n The except  of t h i s as  i s discussed  Code e l s e w h e r e i n the  - other  financial  here.  The  will  regions  or  officers The  i n those  indication  require study,  evaluation  an  i s that  to  given and  communities.  i n contact  business  extent was  of  generated  t o have p e r m a n e n t  obviously and  expect  modern  in  branches  this  the  give  a  spatial  general  sense  communications,  lending  from c e n t r a l i z e d  However, t h i s  At  of  loans.  regarding The  state  important  granting  feasible  of i n t u i t i v e  l a r g e , but  with  relevance  question  prediction is  recognition that high-uncertainty  more i n f o r m a t i o n . the  weighting  a factor of l i t t l e  availability.  friction-free  large urban h e d g e d by  fifth relationship  Code's r e l a t i o n s h i p s d i d n o t  in credit  of h i s theory be  system,  o f what  of  areas.  i n both seeking  Overall,  should  source  d e c i s i o n s on  enough l o a n pay  second,  between  seventh r e l a t i o n s h i p r e f e r s to the  consideration  variations  be  f o r i t to  communications  clear  the  c o s t s when n o t  institutions,  outlying  the  as  The  to the  contact  s i x t h r e l a t i o n s h i p r a i s e s the  whether t h e r e  loans  center  information.  non-monetary  questionable  f u r t h e r i n the d e s c r i p t i o n  r e f e r r e d to  quasi-administrative  and  loan  below.  financial  uncertainty-reducing  monetary  total  fourth relationship i s similar  that  with  to the  r e l a t i o n s h i p i s more  administration,  institutions  deals  relative  outset  investments  of the  present  disagreement with  Code's  diminished  survey  as  the  19 results indicate remain  At  this  point,  i t i s relevant  to  some o f Code's w e a k e r r e l a t i o n s h i p s , w h i c h  as  minor p o i n t s  evaluation the  known.  1)6081116  of disagreement.  i s accomplished  by  administrative procedures The  hierarchial  The  comparing  Code's t h e o r y  for granting  nature  critical  bank  to  loans.  of decision-making  in  g Canadian  chartered  banks i s r e a s o n a b l y  B r a n c h managers c o l l e c t application, deny t h e  and  the  funds are  lending of  the  loan  I f the  lending  are  above t h e office,  loan  Loans above t h i s  office,  where s e n i o r l o a n  limits. Board  value  distance  l e v e l unless  with  be the  sufficient  as  transmitted, foregoing a  causal  the  the  manager,  location  type  loan  of  requests  regional  to  head  have r e l a t i v e l y  high  r e f e r r e d to  is  the  application i s i t was  previously  subordinate  mass o f p a r t i c u l a r  i t will  and  transmitted  r e l a t i o n s h i p hypothesized  o f the  consistent not  are  No  The  within  have h i g h e r d i s c r e t i o n a r y  officers  at  and  r e f e r r e d to  level  a l l officers  size  Approved  of Directors for approval.  by  and  or  particular  -  are  at a higher  loan  to approve  t o the  level  recommended  is  are  Loans above t h e i r  considered  the  etc.).  officers  limits.  a  the d i s c r e t i o n a r y  manager's a b i l i t y ,  manager's l i m i t s  where t h e  o f the  Basically,  secured,  on  i s approved  set according  branch, the fully  loan  limits"  granted.  limits  (how  background data  make a r e c o m m e n d a t i o n  request.  "discretionary  well-documented.  by  levels.  Code,  between  information  and  the  superficially  description. explanation  However, i t  and  other  20 important there  factors affect  i s i n c e n t i v e to  time o f  the  few  loan  whose e x t e n s i v e to  make s o u n d  Naturally, authority who  can  senior the  This  financial  is  are  a l s o one  personnel investment  who  are  convincing  financial  or  some  skills  Also,  reduces  but  the  loan  of  principals  therefore  in this  the  requesting  the  possibility  judgement o f  frequent  directly  large loans  manner.  exposed  of transmitting,loan causal  explanation  decision-making.  verifying  correctly  them  the  through poor investments  f o r the  information-related and  office,  This  to  the  in  bias  t r a n s f e r of  would  factor  branch  principals  in  situations.  Costs a  the  valuable  head  delegating  experience  from  Losses  reason  at  example,  investments.  i n f l u e n c i n g the  shielded  more  physical dissociation  for large loans,  particular  by  Por  enable  large  insulation  persuasion  officer.  greater  training  investments.  officers  social  the  officers  very  less  lower-risk  investment  of personal  be  with  methods p r o v i d e  loan.  and  i s accomplished  to o t h e r s  ration  evaluation  experience  this  relationship.  carefully  j u d g e m e n t s on  handle  approval  this  the  costs  information  o f the  Instead, are  felt  information,  interpreting i t .  and  officers  l o c a t e d who  so  as  to reduce  is  not  a blanket  risks  to  significant in  collecting  importantly,  A more c o n v i n c i n g  loans  are  the  most  l o c a t i o n i s to ask  the  condemnation  can  not  l o c a t i o n of  t o be  of decision-making  are  explanation  where t h e  interpret  institution.  information  This  o f Code's work,  qualified  criticism  because  21  he key  does  concern  credit  himself  decentralization of  r e c e n t l y occurred,  increased backlash  against  and a s i g n i f i c a n t  decisions i n central Canada.^  increasingly efficient  centralization  location of high  influenced  level  making.  observations  levels  The o p e r a t i o n  o f a chartered  bank i s i l l u s t r a t e d  2-1,  from a p o s s i b l e i n v e s t m e n t  lines) (dashed  on t h e d i f f e r e n t i a l  i n the various  information  between  d e c i s i o n s on  of distance  i n Figure  o f unknown  lengths  the nodes, w i t h differentiated  site  lines)  are signified  internal  from  of decision-  which t r a c e s the flow o f  a t b r a n c h , r e g i o n a l and h e a d - o f f i c e  Distances  is  t h a n by t h e c o s t s o f  graphically  points  that  information.  Code made r e l e v a n t importance  have  decision-making  management  where t o l o c a t e k e y p e r s o n n e l ,  would  I t seems o b v i o u s  financial  more b y s t r a t e g i c  transmitting  communications,  o f decision-making  been p r e d i c t e d by Code's t h e o r y . the  political  t h e p r o p e n s i t i e s o f b a n k s t o make t h e  loan  However, w i t h  decision-making  p r i m a r i l y due t o t h e f o r c e s o f  r e g i o n a l competition  more i m p o r t a n t  greater  the l o c a t i o n f a c t o r s o f  officers.  Considerable has  with  to decision, levels. -by b r o k e n  communications  external  of the intermediary.  lines  (dotted  communications  22 Figure DISTANCE  COMPONENTS IN  2.1  CHARTERED BANKING OPERATIONS geographic space  Q?.D O  Other Institutions in Financial Community  Investment Situation  Branch Office  In financial  d e s c r i b i n g the districts, was  result,  financial  the  Institutions little  observable  s u c h as  affinity  theory  spatial  (see  districts insurance  linkages that  describes  environment  tend  increases  decreases,  until  the  be  were  major  strong  d).  companies,  situation  reasonably  As  a  which  show  explained  in  information.  type  of  well. as  in efficiency,  a  friction  compact.  for this  p r e d i c t s that  "...distance  becomes i n e l e v a n t a s  to  of  for uncertainty-reducing  Code's t h e o r y technology  a  distance  f o r such d i s t r i c t s ,  terms o f l e s s e r needs His  internal  Code c o n c l u d e d  of distance  Head Office  Regional Office  from  communications  friction a  of  financial  f a c t o r i n f l u e n c i n g the  distance community  q u a l i t y of  11 service the then  which i t i s able  distance  to provide."  components as  C o d e ' s p r e d i c t i o n may  Efficient  technology  communications distances  'b'  for a and  will  has be  only  provide  financial  »c'.  b e e n done  I f one  in Figure  partially easier  separates 2.1,  correct.  internal  intermediary,  However, i t i s n o t  that i s ,  obvious  that  23 external  communications  involved i n distance  'a' w i l l  benefit. Code s t r e s s e d t h a t friction  the fundamental reason f o r  of distance within  was t h e s u s t a i n e d n e e d  central  i s unstandardized  other  develops  community,  a bond o f t r u s t  to t r a n s f e r . c l o s e and  overlooked  and f r i c t i o n  the importance  between b r a n c h p e r s o n n e l It  i s argued  of distance  i s just  intermediary.  associated  with  uncertainty the  operations.  on t h e s k i l l s  Intermediaries  dealing with  current  uncertainty. the  their  The d a t a  loan are i n i t i a l l y  required  by b o t h  manner.  Communications  as  officer of  One common s o u r c e  of  of the success  and competence  of  o f t h e owner.  such businesses  require  t o be a b l e t o r e d u c e  their  w h i c h h a v e t o be g a t h e r e d f o r unstandardized,  p a r t i e s t o produce  i n t e r v i e w s and f i e l d  friction  have h i g h u n c e r t a i n t i e s  dependency  information  loans.  i n the r e l a t i o n s h i p  businesses  i s the r e l a t i v e  business  sufficient  Smaller  i n contacts  thesis that  between a p r o s p e c t i v e b o r r o w e r and t h e l o a n s an  completely  requesting  i n the present as pronounced  Code  relationship  and people  While  personal  of distance.  of this  frequent  i t i s worthwhile t o  t h e s t a t e d r e l a t i o n s h i p between  communications  Between  and good w i l l .  f a c t o r s may a l s o be i m p o r t a n t ,  underline  information.  i s derived informally,  and d i f f i c u l t  members o f a f i n a n c i a l contact  districts  foruncertainty-reducing  B e c a u s e much o f t h e i n f o r m a t i o n it  financial  and e f f o r t i s  this  data  requiring personal inspections w i l l  in a  travel  occur.  standard such  Similarly,  24 because i t i s d i f f i c u l t a degree types  of t r u s t  of loans.  fostered on  and  to quantify a l l factors  good w i l l  by more f r e q u e n t loans  contact,  officers  In h i s p e r s p e c t i v e o f i s clear  financial raphers the  services,  regarding  the  As  one  policy  geography o f f i n a n c e , the  importance  previously.  loans  of  Both  general  geog-  with explaining  of high l e v e l  However, e s p e c i a l l y bank l o a n s ,  institutional  preoccupied  distribution  all-important.  period  the  did Kerr  were e s s e n t i a l l y  functions.  are  as  are  notwithstanding.  t h a t Code u n d e r s t a t e d  g r o w t h and  f o r many  Better personal relationships  transferring  it  is essential  involved,  financial  i n terms o f d e c i s i o n s officers  w r i t e r noted,  of greater decentralization  i n the (even  field before  the  o f bank d e c i s i o n -  making) : " L e s s t h a n 10 p e r c e n t by number o f a l l l o a n r e q u e s t s have t o be r e f e r r e d t o d i s t r i c t o f f i c e s f o r a u t h o r i z a t i o n and l e s s t h a n 1 p e r c e n t o f a l l l o a n r e q u e s t s have t o be r e f e r r e d a l l t h e way up t o head o f f i c e f o r authorization." Much r e m a i n s t o be therefore,  particularly  between g e n e r a l outside  the  For  financial  from  system,  geography of  by  financial  core  Aside financial  learned  the  i n the  e x p l o r i n g the s e r v i c e s and  location  of the  the  growth  Canadian  c o n t r i b u t i o n s to  f i n a n c e have a p p e a r e d  p a t t e r n s and  economic  f o r e g o i n g work on  incidental  i n sources  relationships  districts.  example, Hoover s u g g e s t e d  differences  geography o f f i n a n c e ,  i n an  in location early  work  finance influence degree of  the theory. that  industrial  corporate  25 concentration. by  1*5  I n h i s example,  credit  eastern manufacturers to r e t a i l e r s  short  west and s o u t h .  This  large  manufacturers  trade  f i n a n c i n g was t o o much f o r s m a l l  branch requests since  extraction by  i n the c a p i t a l -  to shift  as t h e burden scale  credit  i t , but the concept  large tracts  of retail  competition.  t o which  ever  may s t i l l  be u s e f u l  o f Canada a r e u n d e v e l o p e d .  Resource  and s i m i l a r a c t i v i t i e s  may h a v e t o be  f i n a n c i n g extended w i t h i n t h e i n d u s t r y ,  where f i e l d  extended  caused a c o n c e n t r a t i o n o f  i n the east,  Canadian banks a r e a b l e  was  operations  supported  particularly  a r e s m a l l and i n a c c e s s i b l e t o  financial  institutions.  industry,  t h e l o g g i n g c o n t r a c t o r s who c u t a n d t r a n s p o r t  timber As  f o r the m i l l s  timber  areas,  seem  exploitation  pushes  are obvious.  Therefore,  f i n a n c i n g from  another  Hoover a l s o p o i n t e d leasing  form  more f r e e d o m  concentration i n  an a d d i t i o n a l q u e s t i o n  1  onus f o r f i n a n c e overhead could  operators. be l e s s  company.  Leasing  allowed  institutions  operators  and p l a c e d t h e  on t h e e q u i p m e n t d e a l e r s h i p .  costs are minimized,  get into  industry  financial  forest  operators  out i m p l i c a t i o n s o f the  of financing. "* from  business  Together,  seemed l i k e l y ,  a n d men w i t h  Also,  little  capital  a n d a t l e a s t make good wages a s  these  concentrated.  forest  further into inaccessible  t h e t h e s i s t o a n s w e r was w h e t h e r s m a l l  receive  to  Columbia  to f i t the d e s c r i p t i o n i d e a l l y .  the i m p l i c a t i o n s f o r corporate  forestry for  In the B r i t i s h  effects  Again,  caused  the industry  a p p l i c a t i o n to the f o r e s t  since there  a r e so many  independent  26 contractors operating  c u t t i n g and  saw  The consistent it  mills  pulp  hypotheses with  i s relevant  lending  or  out  the  for  present  c e n t r a l place  point  f u n c t i o n and  logs  companies  mills.  of the  modern to  hauling  one  other  t h e s i s are theory.  However,  d i f f e r e n c e between general  functions  retail  and  s e r v i c e i n d u s t r i e s f o r which c e n t r a l  theory  has  application.  In  particular,  amentally  different  give  to a  rise  relationship when a and  on  other  the  the  and  transaction  i s entirely  on  of  which the  s u p p l i e r o f the  order  to The  interests to  allay  by the  credit  friction  some f o r m  in  from  financial imposing  the  good  a  retailer  receives  costs  or  In  borne  of distance  there  the  of selection,  of  customer's s i d e .  i s requested,  complete  risks  the  contrast,  i s completed.  b u y e r s ' market, the  Hence t h e  fund-  the  In  s e r v i c i n g o f p h y s i c a l goods a r e  customer.  transaction  c o n s u m e r good  place  requirements  in  supplier.  the  of  seems  of distance  payment, he n o r m a l l y  the  strong  a  function  informational  c u s t o m e r and  required  demand and  delivery  the  two-way f r i c t i o n  between  than a  lending  because  customer requests  has  good  the  largely  i s no  s e r v i c e must  by  the Unless  information collect  transaction.  institution  protects  its self-  informational requirements  sufficient  involved:  " . . . o f c o u r s e , t h e l e n d i n g p r o c e s s i s a two-way arrangement. I t i s one t h i n g f o r p r o s p e c t i v e b o r r o w e r s t o r e q u e s t an a d v a n c e o f f u n d s . The l e n d i n g bank has t o be s u r e o f g e t t i n g i t s f u n d s b a c k . The a c t o f l e n d i n g  27 money, a g a i n , i s n o t l i k e a f i n a l s a l e , o n c e c o m p l e t e d t o be f o r g o t t e n a b o u t . The money l e n t i s e x p e c t e d t o be returned. H e n c e , n e g o t i a t i o n b e t w e e n c u s t o m e r and bank i s n e c e s s a r y d u r i n g w h i c h t h e a b i l i t y and w i l l i n g n e s s o f t h e p r o s p e c t i v e b o r r o w e r t o r e p a y has t o be a s s e s s e d and the c r e d i t r i s k c o n s i d e r e d . " 5  The  financial  the  friction  but  no  institution of distance  comparable  costs  i s responsible associated with  exist  f o r overcoming i t s investigations,  for retailing  and  service  functions. More t h a n a n y t h i n g has  isolated  geography  of  recognition is  recent,  information finance. o f the  but  As  e l s e , the  f a c t o r s as A l l a n Pred  relevance  broadly  of  preceeding being has  discussion  crucial  to  the  commented,  information  to  geography  based:  "Perhaps the most t e l l i n g i n a d e q u a c y o f c l a s s i c a l t h e o r y i s i t s n e g l e c t o f i n f o r m a t i o n as a l o c a t i o n f a c t o r . In r e c e n t y e a r s many w r i t e r s h a v e commented b o t h on t h e d e c l i n i n g r o l e o f t r a n s p o r t a t i o n as a l o c a t i o n a l d e t e r m i n a n t and on t h e g r o w i n g i m p a c t o f i n f o r m a t i o n , e s p e c i a l l y a s an i n f l u e n c e on t h e l o c a t i o n o f a d m i n i s t r a t i v e u n i t s w i t h i n i n d u s t r i a l and n o n - i n d u s t r i a l o r g a n i z a t i o n s . . . . I n f o r m a t i o n c o s t s a r e o f g r o w i n g i m p o r t a n c e t o the c a l c u l u s o f - i n d u s t r i a l l o c a t i o n p a r t l y due t o t h e i n c r e a s i n g v o l u m e o f e x e c u t i v e and c l e r i c a l t i m e a l l o c a t e d t o i n t r a o r g a n i z a t i o n a l and i n t e r o r g a n i z a ' t i o n a l f a c e - t o - f a c e contacts. Another f a c t o r i s the mounting monetary a l l o c a t i o n s t o t h e t a s k s o f g a t h e r i n g , p r o c e s s i n g and b e n e f i c i a t i n g i n f o r m a t i o n f o r o p e r a t i o n a l and i n n o v a t i v e decisions-making purposes... Locational variations in the a v a i l a b i l i t y of i n f o r m a t i o n a l s o i n f l u e n c e l o c a t i o n a l c h o i c e s i n s o f a r a s t h e y b i a s t h e r a n g e o f known o p p o r t u n i t i e s and p e r m i t u n c e r t a i n t y t o be r e d u c e d more e a s i l y i n some p l a c e s t h a n i n o t h e r s . "  OMISSIONS IN  THE  Before undertaking discussed  the  hypothlses  LITERATURE the  of  this  experienced  in finance  discussions  helped  to r e v e a l  aberrations  i n the  availability  had  little  factors even to  are  not  In officers  mentioned t o  Weight o f  assessing  tend  principals. the  with distance  availability  L e n d i n g on  This  literature,  of  any to  of  extent  be  These cause  but  i n the  aware o f  causing  which These  literature,  their  any  effects  deviations  finance.  Character loan  highly  applications,  the  character  practice i s described  but  persons  could  finance,  writer  or a c c e s s i b i l i t y .  business  to weight  the  thesis with  factors that  d e t e r m i n e what a c t u a l l y was i n the  survey,  forestry financing.  though i t i s n e c e s s a r y  found 1.  t o do  or  field  seems t o  require  only  close  of  loans the  vaguely  access  in  between  17  the  loan  access,  officer the  and  the  businessman.  credit officer  i s also  supplement d i r e c t o b s e r v a t i o n s gained  from  the  businessman's man  community  suppliers  or  less restrictive  generous  line The  is  to  character  Once t h e and  p o l i c y may and  to  information  f o r example,  security provisions  the business-  business r e s u l t such a more  of c r e d i t .  e f f e c t of  increase  indirect  large,  loan  good  in a position  customers.  i s shown t o p o s s e s s g o o d  acumen, some r e l a x a t i o n o f as  at  by  Given  the  'lending  stability  of  on  weight of  character'  existing financing  .29 patterns,  at least  disruptions early  over the short  term.  can c a u s e u n c e r t a i n t y ,  s t u d y o f one b a n k i n g  However,  a s was n o t e d  i n an  system:  "A sound b a n k e r who knows a d i s t r i c t o f t w e l v e o r f i f t e e n hundred square m i l e s i s s u r e l y i n a b e t t e r p o s i t i o n f o r a c o n s i d e r a b l e t i m e t o c a r r y on b u s i n e s s t h a n an e q u ( s i c ) e q u a l l y s o u n d b a n k e r who e n t e r s u p o n the f i e l d as a s t r a n g e r . " 1  "...(When a manager i s t r a n s f e r r e d ) , i f a b o n d o f c o n f i d e n c e t h a t s h o u l d e x i s t between a b a n k e r a n d h i s c l i e n t h a s been f o r m e d , i t i s b r o k e n a n d must be r e c r e a t e d . This n e c e s s a r i l y takes time. Reading t h e record o f a c l i e n t ' s t r a n s a c t i o n s w i t h t h e b r a n c h may g i v e a new m a n a g e r some c l u e t o t h e n a t u r e o f h i s c u s t o m e r b u t i t i s a poor s u b s t i t u t e f o r p e r s o n a l knowledge. Moreo v e r , t h e bond t o be t r u e a n d o f v a l u e t o e a c h must be reciprocal. The c u s t o m e r h a s n o t t h e a d v a n t a g e o f a s t u d y o f t h e new m a n a g e r ' s r e c o r d . In u n c e r t a i n t y and d o u b t he must w a i t a n d l e a r n by e x p e r i e n c e . " y  Businessmen can s w i t c h b a n k s . have  been  unhappy w i t h b a n k i n g In the past  welcomed,  since  •renegade', b u s i n e s s m e n competition  this  at  a businessman  character  the l a t e s t  n o t h i n g would  2. P e r s o n a l i t y  status  S u c h an a t t i t u d e  ( i f he h a d a c h i e v e d  of l i t t l e  would n o t  o f competition. would  lose h i s  this),  since  b e a new c u s t o m e r a b o u t whom  be on r e c o r d .  o f Loans  more c o n s e r v a t i v e  Officers  in quality  the personalities  of loans,  degree  c h a n g i n g banks  bank he w o u l d  Variations from  o f such  f o s t e r e d by the h i s t o r y  be a s common now g i v e n t h e g r e a t e r  good  p r o c e d u r e may n o t  t h e r e was m i s t r u s t  between b a n k s .  A t any r a t e ,  arrangements  o f loan  o f the loans o f f i c e r s .  i n evaluating  while others  service  would  could  arise  Some a r e  the subjective aspects  t a k e a more o p t i m i s t i c  view.  30 Related their  to p e r s o n a l i t y  j o b , and  special matter  effort was  Canadian  put  i s how  whether they  well  loans o f f i c e r s  are w i l l i n g  to look a f t e r  to put  a borrower's  rather succinctly  by  one  like  out  needs.  The  observer  of  banking:  " G r a n t e d , t h e r e i s a good d e a l o f v a r i a t i o n w i t h r e s p e c t t o i n d i v i d u a l m a n a g e r s and what t h e y w i l l do f o r t h e i r customers. However, i t r e m a i n s t h a t a 'good m a n a g e r ' w i l l always take care o f h i s r e g u l a r customers. If i t means g o i n g b a c k t o t h e o f f i c e i n t h e e v e n i n g and t a k i n g o f f h i s c o a t and w o r k i n g i n t o t h e n i g h t , a g o o d m a n a g e r w i l l do i t , i f t h a t i s what i s n e c e s s a r y t o s t r a i g h t e n out a customer's problem. Some g u y s , o f c o u r s e , a r e ' n i n e - t o - f i v e ' w o r k e r s and j u s t do t h e j o b f o r t h e money. These l a t t e r managers a r e n o t a l l t h a t h e l p f u l t o c l i e n t s n e e d i n g a d v i c e and so o n . " ?  Commenting on much t h e  same a s p e c t  retired  ( w i t h o v e r 40  branch  went s e v e r a l  manager  steps  of banking, years of  a  recently-  service),  further:  "There i s a s a y i n g amongst b a n k e r s t h a t t h e r e a r e two k i n d s o f m a n a g e r s ; t h e ' c o u n t e r - j u m p e r s ' and t h e •bookworms'. A s f a r a s r u n n i n g a b r a n c h c o m p l e t e l y by t h e book g o e s , i f y o u f o l l o w e d a l l t h e r u l e s y o u w o u l d crack up. The p e o p l e who l i v e by t h e r u l e - b o o k d o n ' t l a s t , except i n h e a d - o f f i c e , w h i c h is^where they s h o u l d be. The r u l e s a r e made t o be w i n k e d a t . " Enthusiasm w o u l d be It  reflected  seems p r o b a b l e  choice 3.  which loans o f f i c e r s i n the that  of financial  Inter-institution  If  a  convenient  financial  into  relationships  institution  solely  their  with  businessmen would  work  customers.  even b a s e  on  this  their  factor.  Competition  One>other r e a s o n the most  carry  why  a borrower  institution  institution  more f a v o r a b l e l o a n s , t h e n  may  i s related  not to  i s a g g r e s s i v e and  patronize  competition. will  c u s t o m e r s s h o u l d be  grant C  drawn  . 31 from  a l a r g e r market a r e a .  troversy  regarding  charging  that there  but  no  real  higher  price  deposit  competition between is  competition  competition  given  financial  so m i n i s c u l e  t o be  i n terms o f  An  Sears:  institutions  as  is  concritics  service  ( t h a t i s , cheaper loans  rates) .  by  there  in finance, with  i s competition  interest  was  Admittedly,  extreme view  "(t)he  regarding  competition  i n l e n d i n g to  irrelevant  or  to the  small  business  subject  of  22 small business  financing."  Sear's times in  and  the  conclusion  places.  His  information  e a r l y 1 9 6 0 ' s - and  British  Columbia d u r i n g  changes i n the  could not  the  financial  example, r e g a r d i n g  new  e n t r i e s i n b a n k i n g and  is  Mpreover,  for a l l  t o Nova S c o t i a  is different T h e r e have  i n the  been  i n t e r v e n i n g decade; 2*5  government r e g u l a t i o n s , ^ other  British  in  fields  such as  and term  C o l u m b i a ' s r e g i o n a l economy  more g r o w t h - o r i e n t e d than Nova S c o t i a ' s . SUMMARY If  a  1970's.  system  valid  relates  i t probably  for  lending.  be  indeed  'geography  nowledged  of  i t i s not  finance',  that underlying  Reviewing the  literature  references  the  to  C o d e ' s work was the  with  then  theory was  be  i s only roughly  difficult  t h e s i s problem  only  to suggest  i t s u r e l y must  more s u b s t a n t i v e  t h e s i s problem  disagreed  premature  because  were b r i e f but  in passing.  e v e n he The  is  ackhewn.  most  and  trivial.  touched  present  p o r t i o n s o f h i s a r g u m e n t s and  there  upon  author  attempted  '  to  clarify  the p o i n t s o f c o n t e n t i o n .  In  Chapter  Two,  new  relationships  meshed w i t h t h e c o r e h y p o t h e s e s developed  i n Chapter  perspective out  on f o r e s t  the d e s c r i p t i o n  Chapter  Two  One,  availability indicates of  these  of loan  t o p r o v i d e a more  o f 'what' t h e t h e s i s  answers t o t h e q u e s t i o n  as an attempt  o f 'how'  capital  t h e methods o f d a t a questions.  inter-  on r e g i o n a l g r o w t h  industry finance.  c a n be v i e w e d  were  spatial  arise.  Chapter  One s e t  problem  was.  to provide a  priori  variations in  Chapter  collection  comprehensive  Three  to evaluate a l l  33 REFERENCES G i n s b u r g , E s s a y s on Geography a n d E c o n o m i c D e v e l o p m e n t , o p . " c i t . , p . i x . ; a l s o D. E . K e e b l e , " M o d e l s o f Economic Development," i n Models i n Geography.„eds. R. J . C h o r l e y & P. H. H a g g e t t ( L o n d o n : M e t h u e n , 1967), 1  pp. 243-45. p  "Though one a l w a y s w i s h e s f o r more e x p l o r a t i o n s o f t h e i n t e r r e l a t i o n s h i p s between the h i s t o r y o f c a p i t a l m a r k e t s and f i n a n c i a l i n t e r m e d i a r i e s on t h e one hand a n d t h e p r o c e s s o f e c o n o m i c d e v e l o p m e n t on t h e o t h e r , t h e o v e r a l l w o r t h a n d q u a l i t y o f . r e c e n t work on t h i s (money and b a n k i n g ) a s p e c t o f C a n a d i a n h i s t o r y has been i m p r e s s i v e . " : G. P o r t e r , " R e c e n t T r e n d s i n C a n a d i a n B u s i n e s s a n d Economic H i s t o r y , " E n t e r p r i s e and N a t i o n a l Development, e d s . G. P o r t e r & R. D. C u f f ( T o r o n t o : H a k k e r t , 1973), p. H. D o n a l d K e r r , "Some A s p e c t s o f t h e G e o g r a p h y o f F i n a n c e i n Canada," R e a d i n g s i n Canadian Geography, ed. R o b e r t M. I r v i n g ( T o r o n t o : H o l t , R i n e h a r t ' and W i n s t o n ,  1968), p p . 187-201. Ibid.,  4  p.  ,  199.  W i l l i a m R. Code, "The S p a t i a l D y n a m i c s o f Financial Intermediaries: An I n t e r p r e t a t i o n o f t h e D i s t r i b u t i o n o f F i n a n c i a l D e c i s i o n - M a k i n g i n Canada" (unpublished Doctoral d i s s e r t a t i o n , U n i v e r s i t y of C a l i f o r n i a , Berkeley, 1971) 6  Ibid.,  p.  2.  7  Ibid.,  p.  10.  See  J . A.  Galbraith,  Canadian  1970), p . 192.  Ryerson, 9  J a m e s M u i r , The  Canadian  Bank o f Canada, 1956?), p .  15.  Banking  (Toronto:  Banking System  (Royal  ^ B i n h a m m e r , Money. B a n k i n g and t h e C a n a d i a n F i n a n c i a l S y s t e m , o p . c i t . , p . 147; N e u f e l d , The F i n a n c i a l S y s t e m o f Canada, o p . c i t . , p . 133. F o r an i n d i c a t i o n o f the g r e a t e r p r o p o r t i o n o f i n t e r - w a r p e r i o d , see: J . H o l l a d a y , The C a n a d i a n B a n k i n g System ( B o s t o n : B a n k e r s P u b l i s h i n g Co., 1938), p . 135. 1  11 Code, o p . Galbraith,  1970), p . 195.  cit.,  p.  31i8.  Canadian Banking  (Toronto:  Ryerson,  34 13  E . M. H o o v e r , L o c a t i o n T h e o r y a n d t h e Shoe aridLeather I n d u s t r i e s (Cambridge: Harvard U n i v e r s i t y Press, 1 9 3 7 ) , r e p r i n t e d 1968 J o h n s o n R e p r i n t C o r p . New Y o r k . U  Ibid.,  1 5  p . 200-1.  Galbraith,  o p . c i t . , p . 189.  16  A l l a n R. P r e d , "The G r o w t h and D e v e l o p m e n t o f S y s t e m s o f C i t i e s i n A d v a n c e d E c o n o m i e s " , i n Lund S t u d i e s i n G e o g r a p h y . S e r i e s B (Human G e o g r a p h y , No. 38., ( 1 9 7 3 ) , p . 10. 17  The f a c t o r i s m e n t i o n e d o b l i q u e l y i n m o s t d e s c r i p t i v e s t u d i e s o f Canadian banking, but i t s r e l a t i v e i m p o r t a n c e was n o t a p p a r e n t u n t i l a f t e r t h e a u t h o r h a d c o n d u c t e d s e v e r a l p r e l i m i n a r y i n t e r v i e w s o f p e r s o n s who had h a d e x t e n s i v e f i r s t - h a n d e x p e r i e n c e i n C a n a d i a n financial intermediaries. The f i r s t was a w i d e - r a n g i n g i n t e r v i e w o f a r e t i r e d b r a n c h bank manager, a n d t h e s e c o n d i n t e r v i e w was w i t h a s e n i o r o f f i c e r a t t h e B r i t i s h C o l u m b i a r e g i o n a l h e a d q u a r t e r s o f t h e I n d u s t r i a l D e v e l o p m e n t Bank. 18  D. A . M a c G i b b o n , " R e p o r t o f t h e C o m m i s s i o n on Banking and C r e d i t With R e s p e c t t o the I n d u s t r y o f A g r i culture i n the Province o f A l b e r t a , " (unpublished report, Edmonton, 1922), p . 3 0 . 1 9  Ibid.,  p . 31.  20 Comments b a s e d on a p e r s o n a l i n t e r v i e w w i t h a s e n i o r o f f i c e r o f t h e I n d u s t r i a l D e v e l o p m e n t Bank's r e g i o n a l o f f i c e i n V a n c o u v e r , M a r c h , 1973. 21 Comments b a s e d on a p e r s o n a l interview. V a n c o u v e r , 1973. pp J o h n T. S e a r s , I n s t i t u t i o n a l F i n a n c i n g o f S m a l l B u s i n e s s i n Nova S c o t i a ( T o r o n t o : U n i v e r s i t y o f Toronto P r e s s , 1972), p . 2 1 9 . 23 From t h e v i e w p o i n t o f a b a n k e r , G a l b r a i t h w-rote: " B e f o r e t h e 1967 Bank A c t , much o f t h i s c o m p e t i t i o n among the banks emphasized t h e q u a l i t y and v a r i e t y o f s e r v i c e , w i t h t h e c o m p e t i t i o n b e i n g l a r g e l y i n t h e form o f o f f e r i n g b e t t e r o r more s e r v i c e s r a t h e r t h a n i n t e r m s o f i n t e r e s t paid or charged. The r e a s o n i s t h a t u n t i l t h e 1967 Bank A c t t h e b a n k s were s e v e r e l y r e s t r i c t e d , by t h e o l d 6 p e r c e n t c e i l i n g on bank l o a n r a t e s , i n t h e r a t e s t h e y c o u l d /charge f o r l o a n s a n d , h e n c e , i n t h e r a t e s t h e y c o u l d pay on d e p o s i t s . Now a l l t h a t h a s been c h a n g e d . " Galbraith, op. c i t . , p . 4 7 .  35  Chapter 3 METHODS OF DATA  COLLECTION  INTRODUCTION  below. to  The  techniques  The  r a t h e r extended  anyone  influenced  firms permit  from  a widely  felt  appropriate spent  form.''  survey the  that direct  developing  sample  of small  important  that  be and  remote  the data.  i t was would  Therefore,  the q u e s t i o n n a i r e  who  i n d u s t r y company  of their  abandoned.  was  be  some  time  t o be  evaluated either  with  principals,  evaluations, the mail The r e a s o n s  t o o l o n g and  too s e n s i t i v e  was  h a d had e x p e r i e n c e  or forest  a p p r o a c h was  requirements,  a self-administered questionnaire  As a r e s u l t  questionnaire  i n Chapters  mail questionnaires  for collecting  techniques  questions  circumstances  t h e s a m p l e be l a r g e e n o u g h t o  t h e sample  when c o m p l e t e d ,  or both.  intended  evaluation.  by a number o f p e o p l e survey  be o f v a l u e  financing experiences  I t was  be i n c l u d e d and t h a t statistical  on  distributed  companies.  Considering  was  how  t h e s i s problem, as d e s c r i b e d  forest  initially  may  work, b u t was  understand  2, r e q u i r e d t h a t d a t a  collected  are described  the,research.  The  medium  the reader  collection  treatment  considering similar  more t o h e l p  1 and  of data  were  complex and  c a s u a l l y answered  that  included through  36 the  mail. A  telephone  survey  was  briefly  considered  as  an  2 alternative decided views,  but  that and  was  data  the  be u s e f u l t o  collection  questionnaire  standardize THE  Once t h e survey,  other  activities duration, trips. funds  w o u l d be already  the  restricted later  the  cost of  first to  the  forest  were l o c a t e d  i n the  lower mainland  i n drawing The  completed and  first  cases.  group  with firms  being  a  few  hours'  from a  listing  from  offices  valley  than random s e l e c t i o n  the  c a u t i o n must  samples  in production The  be  data.  of interviews  larger corporations. (apparently  limited  yielded  twelve  T h e r e were s e v e r a l r e f u s a l s t o  engaged  field  interviews  or' F r a s e r  d r a w b a c k and  s i x f i r m s were r e j e c t e d aa  as n o t  of  i n d u s t r y f i r m s whose  rather  inferences  day's  survey,  S a m p l e s were drawn  is a theoretical  one  problem  located within  haphazard  Student  travelling.  medium  used  to  interview  a v a i l a b l e f o r extended  o f s m a l l and  The  interwould  c o n d u c t an  trips  s e c t i o n o f the  firms  of Vancouver.  process  personal  constructed  made t o  m a j o r c o n s t r a i n t was  cover  districts.  by  ultimately  SURVEY  d e c i s i o n was  t i m e was  were r e s t r i c t e d drive  I t was  c o n s t r a i n t s , became i m p o r t a n t .  but  Por  well.  responses.  INTERVIEW  initially  The to  r e j e c t e d as  f o r such  or being  principals  cooperate reasons  affiliated  of four  other  s u i t a b l e s a m p l e s ) were e l u s i v e , and  a  37 mutually even the  s a t i s f a c t o r y appointment  a f t e r four executive  or  five  was  return  interviewed  could not  calls. hut  In  the  "be  one  arranged instance,  questionnaire  not  3 completed. A  series of  interviews  with trips:  on  George),  to  w e s t K o o t e n a y s as  w e l l as  in duration  a  from  longer the  spatial  inaccessible was  firms  partially  a  a  high  not  be  distribution  east  t e n d a y s and  The  samples  conduct the  to  necessary  g r e a t e r number o f more  extremely  The  interviews.  Quite  prospective minute,  The  survey  outer  to r e t r a c e  could  be  the  a  imposed  could the  route  at  that  limit  to  the  in  scheduling  circumstances  t o p o s t p o n e an  falls  required  often  the  T h e r e was  often unexpected  subject and  which  weather  h e a v y snow  appointment  interview.  amount o f e f f i c i e n c y  in  was  time s e v e r a l days i n  i t was  trips  interviews.  of the  difficult.  for a  and  resulted  secured  time  in  through the  An  and  last  a  There  (centered  degree of m o b i l i t y . except  conduct  north  w o u l d h a v e been d e s i r a b l e .  travel  future,  a  trip  to  factor, since  made o f f - h i g h w a y  interior  Island,  completed  somewhat u n s a t i s f a c t o r y , as  to  Okanagan r e g i o n .  three  additional thirty-seven The  undertaken  d i s t r i b u t e d sample.  south Vancouver and  an  was  the n o r t h - c e n t r a l  Vancouver I s l a n d ,  varied  trips  a more w i d e l y  were f o u r Prince  field  appointment  a u t h o r s p e n t numerous ;hours  forced at  the  waiting  offices.4 The  size distribution  also unsatisfactory, since  of  firms  smaller  i n the  firms  are  sample not  was  represented  38 in  relative  The  proportion  master l i s t i n g s  tractors, than  whose  other  of firms  capital  production  plywood m i l l s ,  etc.).  special  would  The  effort  firms  during  l a r g e s t number was n o t i c e d  permanent then  that  office  (sawmills,  be r e q u i r e d  operated  working hours.  This  from  to secure  chartered  few a c c o u n t a n t s were w i l l i n g  clients'  operations  Attempts  to interview  (unless small  they  financial  issued  cooperate.  an  living  quarters),  office  to  record-keeping,  to discuss  were  a  interview.  and f i n a n c i a l  their  part-owners).  contractors  on weekends u s u a l l y ended w i t h  i n the evenings  a rebuffal  that  pre-  contact.  Other subjects the  sector  accountant's  however,  further  completely  d i d not maintain  (that i s , detached  often use t h e i r  that  truck-loggers.  of outright refusals to  the channels o f m a i l  cluded  f a r less  equipment o r super-  arid were  i f t h e company  con-  planermills,  to i n c l u d e  maintain  or  truck-logging  I t e a r l y became a p p a r e n t  i t was more d i f f i c u l t  Loggers  i n the industry.  are generally  on-site logging operations  inaccessible the  included  assets  owners o f t e n p e r s o n a l l y  vised  It  t o t h e i r numbers  interviewed  relations of logging  were a s k e d  to describe  contractors.  While .  7  the  r e s p o n s e s were o f u n c e r t a i n  picture The  of t y p i c a l  truck-logger  findings are reported  procedures explained.  followed  during  validity,'  a tentative  f i n a n c i n g was  i n Chapter Pour. t h e completed  obtained.  Next, t h e  interviews are  39 THE The  INTERVIEW  author explained  outset  of each i n t e r v i e w .  varied  little  variation brief  from  one  i n v o l v i n g the  function  was  explained. answered  were p r o m p t l y out  from  the  follow  of the  requested  completed. or  comments any  respondent.  A  to answer a l l interview.  The  questionnaire,  that  standard  the  presence,  The  the  next, with  responses to  author's  ambiguities  questions  questionnaires  to ensure a l l  r e s p o n d e n t was  to question  and  the  invited  purpose  to  behind  question. The  nearly  After  questionnaires  a l l interviews,  written  answers to  completing  willing  to  initiated  by  o r where t h e further  time,  and  opinions close  promised  respondent  In  cases o f  closely  was  and  related  regarding  the  forest  a summary  of the  comments.  discussion, not  in  scheduled could  closed.  relaxed  of each interview,  verbal  questions  not  interesting  the  and  respondent  survey r e s u l t s .  The  were  usually the  interviews, spare  Usually  industry  In  supplement  many r e s p o n d e n t s  i n d i c a t e d he  interview  would  with  unstructured  author asking  the  respondent  the  questionnaire,  respondent  the  the  the  the  were s e l f - a d m i n i s t e r e d .  some q u e s t i o n s  e n g a g e i n an  questionnaire.  At  copy  in collecting  i n the  to the  purpose o f the  a  I t was  purpose at  introductory  d i s c u s s i o n would u s u a l l y  its  any  The  survey  interview  r e s p o n d e n t s were g i v e n  point  the  c a u s e d "by q u e s t i o n s  curiousity  be  PROCEDURE  however,  anecdotes finance. was interviews  40 ranged  i n duration  lasting being  almost  about  from  four  the  report  identity  comments stances was  twenty minutes  with  o f an h o u r .  These r e p o r t s  of respondents) included  w h i c h prompted  these  during  tape-record  comments  were d i r e c t l y  The  circum-  questionnaire  on t h e b a s i s  The d e c i s i o n  or otherwise d i r e c t l y  experience  concealed  or contradictions  the i n t e r v i e w .  previous  (which  as w e l l as the  where p o s s i b l e  s t a t e m e n t s was made b e f o r e  a private  significant  comments.  checked and o m i s s i o n s  comments  probably  f o l l o w i n g each interview,  was made.  in correctly  t o one  the average  made by t h e r e s p o n d e n t  also  filled  hours,  three-quarters  Immediately written  about  record  the survey  respondents  began.  people  of verbal  to not 1  Some  i n i n t e r v i e w i n g had shown recorded,  were  tend  that  when  t o make  only  Q  neutral  and s u p e r f i c i a l  recording bias,  statements.  the interviews  introduced  i t d i d have a p p a r e n t  responses.  The i n t e r v i e w  documental source hypotheses  could  from  success reports  hypotheses also  o f answers  form.  THE  i n producing provided  of  candid  an a d d i t i o n a l  QUESTIONNAIRE  each question  The p u r p o s e  were i n c o r p o r a t e d  desirable  the p o s s i b i l i t y  be made.  section explains  questionnaire  t h e method o f  which a p p r a i s a l o f the survey  CONCEPTUAL BREAKDOWN OP  This  While  to i l l u s t r a t e  to each q u e s t i o n  into how  o f the  i s t o show how questions.  I t was  the o p t i o n a l  were m e a n i n g f u l  the  categories  divisions.  41 Certain themselves, next  but  questions ensured  i n the  lacked  experience,  around  the  he  that  hypothesis-testing  experience  the  q u a l i f y i n g question  he  was he  respondents' experiences, format  question.  Therefore,  complexity, answers. details  The are  in  the  1.  General  was  was  although  design  question  was  not  bypass copy  the  personal  respondent  directed  him  to answer.  of  i t for  If  his  variation in  d e s i r a b l e to use  i t added  necessary  type of business  be  wider the  the  answered  to prevent  o f the  an  every  g r e a t l y to  i n s t r u c t i o n s and  the  spurious other  questionnaire  growth,  external  financial  organization?  distribution  d e p e n d e n c e on  to r a i s e equity  capital  reminded  where e a c h r e s p o n d e n t  since  found  The  presumption  of ownership,  financial  increased  the  intermediaries  equity  capital  in  can  capital,  The  lowest  hence the  scale of  ability  most d e p e n d e n c e  on  intermediaries.  partnership has  less  borrowing.  a . "sole p r o p r i e t o r s h i p  b.  qualified  i t was  shown i n t h e  the  achieving replace  not  had  in  Appendix.  that  should  the  answering  Where t h e  Because o f u n p r e d i c t a b l e  inflexible  hypotheses  a c t u a l l y had  p a r t i c u l a r matter.  questions  answer.  involve  a respondent  question  d i d have e x p e r i e n c e ,  next  d i d not  A  degree o f  taken place,  but  the  expansion  of  addition of  equity further  42 equity  capital  c.  i s probably  more  difficult.  corporation (1)  l e s s than ten shareholders  has  been  incorporated  while  f o r tax or legal  i t does n o t have a p p a r e n t wide a p p e a l t o  outside  equity  have  investors, or else  further capacity  equity  investment  firms  characterized  ten shareholders  some  expansion  and p r o b a b l y  highest  should  on t h e i m p l i e d  endence from  2. A f f i l i a t i o n s  borrow e x p a n s i o n  financial  This  from  other  parent  not a v a i l a b l e to independent  w i s e be o f s i m i l a r s i z e independent  and  capital,  and  f o r purposes o f response  i s judged indep-  intermediaries.  on t h e h y p o t h e s i s funds  by t h e  h a s had  scale of relative  of the firm with  i s based  already  capital  be g o o d .  through  The company h a s  i n the base o f e q u i t y  to further equity  expansion  a.  than  (2) more t h a n  incorporated  may  f o r f i n a n c i n g growth  options.  been  s h a r e s have n o t  The company  two p r e c e d i n g  access  native  consider-  ations,  been o f f e r e d f o r p u b l i c s a l e .  question  t h e company  companies?  that  The  a s u b s i d i a r y can  corporations, firms  an  who may  alter-  other-  circumstances.  No o p t i o n  t o borrow from  parent  companies. b.  f i r m owns one o r more s u b s i d i a r y  companies  Since  43 the  f i r m may  finance and  their  equity  able  expansion,  from  intermediaries  be  the  was  w o u l d be  valid  Does t h e  measures the  A  poor at  that  However, no  of the  only  or  funds  be borrowed  in another parent  question  The  that  reason  way,  corporation  distribution  o f the  i f access site, to  i n only  one  This  F i r m s may  question  operate  l o c a t i o n could  intermediaries  to  firm'.  at  least  expected  financial  obtain  at  would  one  because,  intermediary  information  be  were  a widely-distributed firm  e n j o y good a c c e s s  the  division?  f r o m a number o f d i s t r i b u t e d  c l e a r r e l a t i o n s h i p was  d i v i s i o n s of  f o r measuring  groups.  firm.  to f i n a n c i a l  while  crudely  c e r t a i n hypotheses  for certain size  distributed firm, a  no  This  firm.  possibility  i t more d i f f i c u l t  a.  f i r m may  with  when t h e  f i r m h a v e more t h a n one  more l i k e l y  widely  borrowing,  intermediaries  firm operating  handicapped  The  corporations;  s i n g l e l o c a t i o n or  sites.  company  o f peak employment?  size  from a  external  excellent.  loan.  the  all  to  should  t h r o u g h .parent  size  find  i t s access  supplement  measures the  a  s u b s i d i a r i e s to  to  Scale  be  to  subsidiary of another  guarantees the  4.  lend  c.  borrowing  3.  c a l l e d upon t o  investors  internally by  be  site. given may  concerning  44 b. yes (1) where divisions are vertically integrated This response indicates that the firm had grown by adding divisions in the intermediate stages of production. (2) where divisions are horizontally integrated In this case growth had been towards broader spatial exploitation of the resource. 5. Is the head-office location shared by production operations?  The hypothesis i s that i f the head-office  (the work place of key executives, principals) is accessible to a range of financial intermediaries, financial relations w i l l be better.  The question w i l l reveal those firms  whose head offices are separated from f i e l d operations (necessarily resource oriented), and which have sought higher access instead with central urban services such as finance. 6. What i s the residential location of the principals? This was to determine the extent of reliance on foreign ownership and to determine "whether some firms in remote locations are in fact supported by principals who  maintain  high personal access with larger urban centers, thus giving their firms greater access to financial institutions q than would otherwise be the case."  45  7. Distance from company headquarters to patronized bank? This measure was to evaluate the friction-of-distance hypothesis. 8. Are there other branches of any chartered bank located appreciably closer to the firm?  This question  filters  out respondents who had made their choice of bank for reasons other than spatial convenience. 9. What are the reasons for using the chosen branch, given the alternative bank branches which are closer?  Persons  answering had already indicated a willingness to travel further than was necessary, and the reasons are required, to understand  why.  a. the branch patronized i s quite convenient, sidering travel routes of executives  con-  This answer is not  a denial of the importance of distance, since i t involves high accessibility not apparent without closer inspection. b. the banking relationship was established in the past, and i t i s not deemed worthwhile to sever this relationship to gain a more convenient banking point This response indicates that the respondent was  insen-  sitive to the travel costs associated with his inconvenient choice of bank.  The banking relationship may  be continued out of habit, or for past reasons not recently evaluated.  The respondent does not believe his banking  relationships could be improved upon, and there i s an inference that his 'character' has been satisfactorily  46 established c  the  at  the  present  patronized  b r a n c h manager i s a authority  This  branch i s a large  senior  response  decision-making  bank.  man  of  b r a n c h manager can  than  j u n i o r b r a n c h manager.  a d.  and  the  manager o f  c a p a b l e man  managers i n the indicates and  a  ability  past  with,  area  that  favorable of the  or  reaction  present  to  towards  a  active branch  This  the  manager, and  l e a s t one  that  business  other  known  internal  response  personality  suggests  manager who  contrasting  lacked  qualities. e.  a  standing  p o l i c y of  particular  chartered  patronized  i s the  This  has  the  bank i s an  compared one  the  the  more  a belief  handle  patronized  to d e a l  experiences with at  those  better  the  awareness o f  b a n k s , and  senior  and  with r e l a t i v e l y  implies  structure  one,  response  the  bank and  firm  the ibranch  c l o s e s t branch of  indicates  once e s t a b l i s h e d ,  should  the  i s to  their  attitude that  endure f o r a  deal  with  a  currently organization banking r e l a t i o n s ,  lifetime  at  the  same b a n k . 10.  Has  the  same l o a n offer the  from  one  firm  ever approached  proposal the  a f t e r r e c e i v i n g an  firm's usual  following.  a s e c o n d bank w i t h  bank?  A  unsatisfactory filter  question  the loan for  47 11.  Where i t was p o s s i b l e t o c o n s i d e r  two  bank o r g a n i z a t i o n s  were t h e r e  significant  considering required  1 2  «  from  your  respondent  sufficient without placed  factors?  t o measure t h e d e g r e e o f chartered  banking  companies.  financial  purpose.  Firstly,  answering  standing  institutions? i t provided  the q u e s t i o n n a i r e  context  following  banking  with  question that  was o f valid  answers  The q u e s t i o n  was  purpose,  t o answer t h e  question.  Have y o u r e p r e s e n t e d  negotiations  This  by i t s s e c o n d  out respondents not q u a l i f i e d  loans  a check  i n the firm to provide  i n i t s immediate  to  f o r business  d r a w i n g upon g u e s s e s o r h e a r s a y .  filter  second  14.  principal.  charges o r other  firm in negotiations  banks o r o t h e r  the  one  a s t e r m , maximum  between d i f f e r e n t  a dual  13.  offers^  was d e s i g n e d  had  to  differences in their  A r e y o u one o f t h e p e r s o n s who a r e q u a l i f i e d  represent  from  situation.  security, interest  competition  offers  for* t h e same l e n d i n g  such aspects  This question  loan  the firm i n business  different  organization?  This  loan  b r a n c h m a n a g e r s o f t h e same was a f i l t e r  question  f o r the  following. In your o p i n i o n ,  were t h e r e n o t i c a b l e d i f f e r e n c e s i n  the  way t h e s e  managers viewed  one  man w o u l d  grant  ditions manager?  lending  situations,  that  the l o a n under a c e r t a i n s e t o f con-  t h a t would n o t h a v e been a c c e p t a b l e This  such  question  was i n t e n d e d  to another  t o measure  t h e -.  48 significance  o f p o s s i b l e d i f f e r e n c e s between  managers' c r e d i t - g r a n t i n g a.  yes,  b . no. criteria  that  criteria.  s u c h d i f f e r e n c e s were n o t i c e d any  d i f f e r e n c e s between m a n a g e r s '  were n o t  c. no  branch  that  opinion,  were p u t  pronounced  cannot r e c a l l  forward  lending  s i m i l a r loan  to d i f f e r e n t  managers  situations  A l l are  self-  explanatory. d . no  opinion,  to d i f f e r e n t monetary  managers, but  conditions  were s i m i l a r differences monetary uted  This  Specify  firm's  t i m e s when t h e  f o r the  The  allows  were made  of  external  credit)  possible  to q u i t e d i f f e r e n t  external  d i f f e r e n c e s could not  be  attrib- .  credit-granting criteria  changes o f monetary p o l i c y c o u l d  of  have  effects. the  regional center  headquarters  British  at  option  conditions.  these  not  proposals  tightness  to v a r i a t i o n s i n the  caused  loan  (which a f f e c t  w h i c h were due  managers s i n c e  15.  comparable  Columbia  This  which i s c l o s e s t to  question  i n which the  shows t h e  firm maintains  region its  the of  executive  offices. 16. to  What i s t h e the  highway m i l e a g e  from  selected r e g i o n a l center?  indicate  the  remoteness of the  One  company  headquarters  p u r p o s e was  company, where  to  remoteness  49 was  measured  center.  A  nearest  i n terms o f d i s t a n c e  second  p u r p o s e was  regional center.  distance  to the n e a r e s t  A  to  the  to give  second  Industrial  nearest  the  regional  distance  to  the  p u r p o s e was  to g i v e  Development  Bank  the  office. 17.  The  respondent  knowledge  of the  i s requested  following institutions  medium-term  loans,  require  research,  any  knowledge  t h a t he  while  has  colleagues  two  purposes;  firstly  business. evaluate Roynat  of  this  Ltd.,  institution); chartered checked source  the  three  measure t h e  institutional  loan the  sources  estimating  of-distance,  an  the  of  market.  Bank; and  of the paid  question to  the  T h i s w o u l d be  c o n t r i b u t i o n of borrowers to seeking  f o r finance  on  the for  to  domestic to  be  different  increasingly greater  s i n c e a businessman  had  term-lending  which i n d i c a t e d a  finance.  by  companies;  o f a d v e r t i s i n g was  respondent  would base h i s s e a r c h capital  possessed  were u s e d  finance  Development  purpose  a t t e n t i o n the  include  comprehensively  specialized  strength  second  be  to  to  This question  how  commercial  categories  The  meant  institutions  Industrial The  i s not  intermediaries advertised  of  o f k n o w l e d g e , and  of knowledge.  for  types  grant  i s urged  firm.  out  example o f a  banks.  by  i n the  general  which  o r knows t o  to f i n d  concept: (an  respondent  financial  Several  question  himself  executive  types  the  the  his  various  to i n d i c a t e h i s  depth was  to  various useful friction-  a medium-term h i s knowledge  of  50 18.  Did the firm  fixed of  formulate  assets during the past  fixed  definition  o f growth such employed. figures  the concept  Employment  g r o w t h was i g n o r e d  equipment.  g r o w t h i n employment fixed  assets.  related In this  For  example,  persons  because  employment and t h e  to the capacity schema,  that the planning  long-term  i f a businessman  perceptions  i n growth.  had n o t f o r m u l a t e d  t h e two y e a r  plans f o r  p e r i o d , then h i s  would n o t p r o v i d e a sample  f o revaluation of  spatial  differences i n availability  spatial  b i a s t o s u c h no-growth companies s u g g e s t e d  the  conservative attitude  ditioned financial  were d r o p p e d  explicitly  19.  To what l e v e l  two  years  actually  the  level  o f planning  to  these  of credit  plans?  (unless  t o w a r d s g r o w t h h a d been  by p o o r r e c e p t i o n s o f p a s t e x p a n s i o n institutions).  In o t h e r  cases,  because o f poor  were t h e e x p a n s i o n carried?  f i n a n c i n g , then  that con-  p l a n s by  perhaps  plans  financing prospects.  plans  I f the plans  I t was d e c i d e d  of  source o f  forspatial variations  growth o f a s s e t s over business  types  i s made p o s s i b l e by an e x p a n s i o n  I t was f e l t  i n testing  other  fluctuations,  o f t h e b u s i n e s s m e n w o u l d be a p r a c t i c a l evidence  development.  i n t h e number o f  are subject to short-term  the production  "growth  linkage o f the  o f economic growth i g n o r e s as increases  of  The t e r m  o f economic  maximum number i s more o r l e s s of  f o r expansion  two y e a r s ?  assets" i s the p i v o t a l  questionnaire with This  any p l a n s  o f the previous were c a r r i e d t o  what h a d h a p p e n e d  that the course  o f events  51 for  one  plan o f each respondent  was  through to i t s eventual d i s p o s a l . was  t o be  of  the l a s t  expansion  t o be f o l l o w e d In e a c h  project  case,  this  taken t o the  stage  planning finances.  20.  What g e n e r a l s o u r c e o f f i n a n c i n g had  planned?  This  d e n t s who  planned  the  was  expansion.  directed  a filter  been  originally  question to i d e n t i f y  t o employ  internal  A l l respondents  funds  of this  to  respon-  finance  c a t e g o r y were  past following questions dealing with  financial  institutions. 21. a  D i d the  loan  filter  firm  ever approach  i n o r d e r to c a r r y question to  attempted instead  to r a i s e  b o n d s , o r o t h e r w i s e had  preceding,  The  capital borrowed  to borrowing  22.  a l l financial  f o r a loan  which  was  given separate status the need  not  institution,  but  selling  shares  w i t h the  one  of the  intermediaries.  institutions  f i n a n c i n g was from  or  non-institutional  combined  from  which, were  sought  t h e one  f o r a complete  approached.  this  respondents would  set of plans This question  following  listing  I t was  for  another  had  from  intermediaries emphasis,  which  r e g a r d i n g the l a s t  for  emphasize  external  not  was  the p r e v a l e n c e o f each  alternatives  approached  by  institution  This  firms  a financial  q u e s t i o n was  to determine  Indicate  the plan?  separate those  t o b o r r o w from  sought  sources.  out  a financial  feared  to  of a l l that  only mention  without those  52 institutions  each  which favorably  23.  In  the  institution?  happened  to  financial of  each  a  each  the  have  his  entire  In  but  the  the  proposal.  approach  what  of  approach  three  to  had  The u l t i m a t e  one  to  disposal  alternative  approached.  resulted  did not  and  the  isfaction  was  funds  plan  were  case,  to  the  later,  was  respondent funds  the  to  full  determine any  loan  jeopardy.  conditions  to  the  found  institution  the  loan  related  make  of  perhaps  had  to  in  sufficient  or  other  of  want  placed  this  offered  question  impact  somewhat either  carry  through  amount  bothered  may  was him.  A  whether,  the  dissat-  felt  the  growth  on  company.  As an  was  offer  following  the  loan  sources  project,  authorized  after  loan  modification  plan  loan  been  as  of  determines  credit.  traced  their  outcome  plans  for  institution  expansion  the  institution  alternative  not  to  question  was  unsatisfactory  24.  This  expansion  without  the  c.  of  was  satisfactory  proceeded  b.  what  institutions  for  a.  the  the  inquiry  answers  Unless  case,  received  indicated  by  institution  unsatisfactory  to  dissatisfaction  a.  the  high  the  preceding  resulted your  in  firm.  a  question,  loan  offer  The r e a s o n s  an  approach  that for  was  the  were:  cost  of  the  loan  A high  cost  loan  would  53 diminish would  the expected  have  still  return  taken  place.  b . some s a c r i f i c e been  involved  importance than  o f m a n a g e r i a l c o n t r o l would  option  possibly injecting  company c  This  might  seem o f  a more  expansion  the f u l l  option  be d i f f i c u l t  amount r e q u e s t e d  i n d i c a t e s that  institution  would  d. l o a n  conservative  collateral  offer  or security required  acceptable  i n t e r m s o f amount, b u t f u t u r e  the  the assets  later  expansion plans  which otherwise already  have  liens  would  identify loan  risk  somewhat  was  of  of  would  earnings,  failure,  be l o s t .  be a f f e c t e d b e c a u s e  As w e l l , assets  f o r s e c u r i t y w o u l d ''  on t h e m .  the loan  satisfactory?  r e s p o n d e n t s who  offer  serious  be o f f e r e d  25. D i d y o u r f i r m a c c e p t was n o t c o m p l e t e l y  was  options  o f temporary f a i l u r e  u s e d as s e c u r i t y would  could  plans.  indicates that the loan  f i r m w o u l d u n d e r g o more  since  forthcoming  of the  the expansion  This  In case  effects  to p r e d i c t .  excessive  be a f f e c t e d .  attitude  w o u l d n o t be  the loan  have r e d u c e d  option  other  p r o j e c t s , any r e s t r i c t i v e  growth would  have  personal  t o t h e p r i n c i p a l s o f t h e company, b u t  towards l a t e r on  This  on t h e p r o j e c t , h u t g r o w t h  but decided  offer, This  considered  although i t  was a f i l t e r  to  the " u n s a t i s f a c t o r y "  to not take i t .  54  26.  What  changes i n the p l a n  occurred,  t h a t were  solely  due t o t h e u n s a t i s f a c t o r y f i n a n c i n g a r r a n g e m e n t s ? p u r p o s e was on  to determine the e f f e c t s  the expansion  explanatory, of the  project.  o f the f i n a n c i n g  The r e s p o n s e s  are  self-  and p r o b e t h e i m m e d i a t e e f f e c t s  on  growth  company.  a . no m o d i f i c a t i o n s t o t h e o r i g i n a l p l a n n i n g were b.  original  were e f f e c t e d  capital-allocation  necessary  c. o r i g i n a l  of  The  expenditure  plans  scale of plans  were s c a l e d down  was k e p t ,  on t h e a c t u a l e x p e n d i t u r e s ,  but economies by  substitution  cheaper u n i t s , e t c . d.  carried  t h e o f f e r e d amount  to f i n a n c i n g d i r e c t l y  institution  taking other 27.  internal  and fate  capital  financial  plan.  by  firm  in obtaining external financing,  considered? complexity  that a l l respondents  of their  was m a i n t a i n e d  o f the  o f a c t i o n d i d the firm  to the i n t e r n a l  ensured  a  a n d a p p l y i n g a s q u e e z e on t h e  allotments  the d i f f i c u l t y  w h i c h were b e i n g  related  were  some e x t e r n a l  through  scale of plans  t h e o f f e r e d amount  course  plans  and the p l a n s  ,  the o r i g i n a l  Given  what  taken,  o u t by c o m b i n i n g t h e amount w i t h  alternative  e.  was  take  r e g a r d i n g the  This question  was  of the questionnaire,  had i n d i c a t e d  the u l t i m a t e  55 28. to  In  final  c h e c k o f f any  or are is  this  now  question,  of  the  a l l respondents are  following features  characteristic  of h i s  necessary  f o r an  assessment  alternatives  to the  external  plans  directly  intention spatial  the  public, be  f i r m has  firms  i n the  sized  companies  corporations. samples  the  iduals,  be  purchasing  asked  and  maintaining  whether the the  s u c h a s s e t s may  raw  The  as  the  complete  While  the  general were  access  to  the  t h a t when medium-  steps, than  expansion.  there  direct  these  their  that  of  f i r m s w o u l d be  to o t h e r  c o n c e p t was  firms  large  suitable  or  that  o f work, t h e costs  indiv-  their  a matter  assets of  having  company with  equipment  job.  raw  by  associated  capital  materials,were  contractor, act  significant  t h e work o f s u p p l y i n g  escape d i r e c t  contractors to  company o r  loans.  contracted  certain portions to  bonds t o  The  survey.  for production  able  expenditure  were  recognized  more l i m i t e d  present  f i r m has  c o n t r a c t o r s do  the  be  or  had  undertake  a p o r t i o n or a l l of  materials  by  may  i t was  of  institution.  others  Such medium-sized  f o r the  b.  would  first  success  or  s a m p l e who  or bond m a r k e t s ,  information  a l t e r n a t i v e means o f  dealers  h a v e "been  prevalence  financing of  s o l d shares  stock  relative  the  financial  i n these  investment  no  of  that  The  to d i s c o v e r whether there  patterns  a.  to  was  through a  firm.  requested  A  required  sub-question of  the  importance  s e c u r i t y f o r short-term  since  operating  c.  capital  buildings,  goods r e q u i r e d f o r p r o d u c t i o n ,  machinery  medium-term p e r i o d s goods, r a t h e r than cases  the  through by  and  credit  the  The  financing..  A  sub-question  this  type  capital  buildings, or rented  of  equipment i s  has  a  standing  intermediary determined  to  the  f o r medium o r l o n g - t e r m  e. firm  the  the  be  periods  distributed  industry  occurred of r e a l  has  of this  i n the  over  Strictly  at least  should  assets  take-overs, o f one  be  The  which are  company a r e  is of  life  sub-question  another  g r o w t h may  there  is a  status-quo was  similar  purchased  by  same not  Also,  meant  except the  the  viable,  situation  not  have  possibility  more e c o n o m i c a l l y  question  leased  cost  s e p a r a t e l y i n the  but  as  alternative.  speaking,  p r e s e r v i n g the  preventing decline. include  A  growth because o f s c a l e economies. unit  such  the u s e f u l  p a s t merged w i t h  because o f mergers,  consolidated thus  frequency  firm  of  Leasing  f i n a n c i n g s i n c e the  that p r e v i o u s l y operated  general  frequency  sometimes  t h e a s s e t by means o f l e a s e p a y m e n t s .  determined  provide  goods r e q u i r e d f o r p r o d u c t i o n ,  can  such  of the n e c e s s i t y  machinery o r equipment are  assets  In  of f i n a n c i n g .  c o m p a r a b l e t o medium t e r m leased  where t h e  for  capital  institution  retailer  for a financial  employing  vendor o f the  is relieved  arrangement  d.  the  a financial  company  search.  as  e q u i p m e n t , have "been f i n a n c e d  f i n a n c i n g i s arranged  purchased for a  or  such  and  to  that  other,  the and  a  57  f i n a n c i a l transaction occurs. SUMMARY The  f o r e g o i n g i n d i c a t e s the r a t i o n a l e f o r the  q u e s t i o n n a i r e , and  the r e a d e r undoubtedly  s t r u c k by i t s c o m p l e x i t y .  for financing  experiences  i s a coarse measuring d e v i c e . The  p r o c e s s of d a t a c o l l e c t i o n was  l e a r n i n g experience.  be adequately  v e r y much a  At t i m e s , the author  t o p i c o f f i n a n c i a l e x p e r i e n c e was to  have been  In f a c t , however, the q u e s t i o n -  n a i r e does not completely account and  will  t r e a t e d i n any  felt  simply too  t h a t the  complex  survey method.  Therefore,  a case study approach would have been more s u c c e s s f u l in  e l i m i n a t i n g many areas o f u n c e r t a i n t y . On  the o t h e r hand, i t i s q u e s t i o n a b l e t h a t the  t h e s i s problem would have been r e s o l v e d s i g n i f i c a n t l y by a h a n d f u l of cases, g i v e n i t s g e n e r a l n a t u r e . of  Many  the i n t e r v i e w s d i d c o n t r i b u t e t h e type o f i n s i g h t  which c o u l d be expected approach.  from  the more d e t a i l e d  These c o n t r i b u t i o n s were r e c o r d e d  i n t e r v i e w r e p o r t s , and used as r e p o r t e d i n the next author attempted  case  study  i n the  e x t e n s i v e l y i n the e v a l u a t i o n ,  chapter.  In t h a t r e s p e c t , the  to keep the b e s t o f both w o r l d s .  the t h e s i s t o p i c and r e s o u r c e s , t h e r e was  no  Given  correct  c h o i c e which would have r e s o l v e d the methodology dilemma. Chapter survey and  Pour p r e s e n t s . t h e data from  e v a l u a t e s the t h e s i s hypotheses  this information.  the  field  i n view o f  58 REFERENCES  'An extensive literature has developed to assist the non-expert in constructing suitable questionnaires. For an i n t r o d u c t i o n , see: T. L. Burton & G. E. Cherry, Social Research Techniques For Planners (London: George Allen & Unwin Ltd., 1970) pp." Also; T. Hillway, I n t r o d u c t i o n to Research ('Boston: Houghton M i f f l i n , 1956), p. 194. The basic problem with a telephone survey was that this medium of communication could not provide a uniformly satisfactory degree of privacy for the interviews, and privacy was an elemental requirement for obtaining responses. If calls were placed to any forestry operations reachable only by radio-phones, for example, there could be no assurance that virtually hundreds of other individuals with radio-receiver units would not be monitoring the telephone c a l l s . Circumstances were inopportune. The interview took place in a hotel lounge at the 1975 Truck Loggers convention in Vancouver. 1  I n one notable instance, the executive twice postponed the interview at the last minute and was not eventually available for another twenty-four hours. The interview was especially interesting though, as the man had been in the midst of negotiations for a business loan. 4  The l i s t i n g was abstracted from forest industry directories. There were three directories involved: Madison's Canadian Lumber Directory (Vancouver: Madison's Canadian Lumber Reporter, Ltd., 1973 ed.); British Columbia Lumberman Grgenbook (Vancouver: Journal of Commerce Ltd., 1973 ed.); ABC - British Columbia Lumber Trade Directory and "yearbook (Vancouver: Progress Publishing Co. (1958) Ltd., 1970 ed.). ^Exceptionally large contractors, of course, have assets with an apparent value of millions of dollars and would in fact be larger in terms of assets than many small and medium sawmill companies. 7  Uncertainty arises because the information i s second-hand. However, i t probably has some validity because the persons divulging the information had had reasonable opportunity to have acquired knowledge of the financial affairs of small contractors. In most cases, the respondents were the ones who made out the paychecks for the contractors a f f i l i a t e d with their company. In this position they could gain considerable insight, as for example, some respondents mentioned having had  59 c r e d i t o f f i c e r s from one o r a n o t h e r f i n a n c i a l i n t e r m e d i a r y c a l l f o r c r e d i t r e f e r e n c e s w h e n e v e r a c o n t r a c t o r was about t o arrange f i n a n c i n g f o r t h e purchase o f c a p i t a l equipment.  p S e a r s made t h e p r a c t i c a l o b s e r v a t i o n t h a t r e a d i n g from a p r e p a r e d l i s t o f q u e s t i o n s h a d seemed t o make h i s i n t e r v i e w s u b j e c t s v i s i b l y u n c o m f o r t a b l e , s o he h a d even d i s c o n t i n u e d t h a t p r a c t i c e . Sears, I n s t i t u t i o n a l F i n a n c i n g o f S m a l l B u s i n e s s i n N o v a S c o t i a , o p . c i t . , p . 9. ^Quoted  from  preamble  to Question  6,  Appendix.  i  60  Chapter 4 PRESENTATION  OF SURVEY  RESULTS  INTRODUCTION The in  results  two s e c t i o n s .  questionnaire qualitative analysis for  of the interview  data  i s followed  The r e a s o n  section  t h a t most  information  and  i t sbasic  form  As s u g g e s t e d  earlier,  method.  contributed  this  was  first  appraisal. assessment  non-standardized,  use i n rigorous a n a l y s i s . second  type  of a case-study  Unquestionably,  of information  ANALYSIS  the q u a l i t a t i v e  OF  was  approach than the  most t o t h e knowledge a c q u i r e d  QUANTITATIVE  However,  f o r the q u a l i t a t i v e  collected  resisted  characteristic  survey  methods.  constructed  o f sample made t h i s  reason  was  more  had b e e n  o f the a n a l y s i s a non-rigorous A compelling  of  f o r the q u a n t i t a t i v e  the a p p l i c a t i o n o f s t a t i s t i c a l the,smallness  standard  by a p r e s e n t a t i o n  that the questionnaire  problems with  are described  A quantitative analysis of the  findings.  was  survey  data  during  the  survey.  STANDARD  QUESTIONNAIRES 1. B a s i c  Components Fifty-two  o f the A n a l y s i s  v a r i a b l e s were d e v e l o p e d  from  t h e 28  1 questions  on t h e q u e s t i o n n a i r e .  Most q u e s t i o n s  were o f  61 the  closed  variety,  r e s p o n d e n t would  such that  fall  into  the  only  answer o f  one  any  category  particular  of  a  multiple-  2 c h o i c e range analysis, taken  to  of  possible  variables  were a l s o  thus t r e a t i n g a l l o f  nominal l e v e l  o f measurement.  questionnaire  was  completely  o f measurements f o r unique  Bet  were 43  In  proportion A  desirable.  level  order),  of the  Also,  (such that  statement  associated  a  was  description  variable  occurred  association and  compared  to  was  test  the  could of  how  two  what was  selection of  for association  (and  based upon p r e v i o u s l y  of  occur  in  are  interpreted  the  of  unless each  expected  conceptualized  hypothesis  relevant  nominal  systematic  categories  i n the  in  differences  were o f  variables  t o be  so,  are  such  the  pairs  of  hypothesized  developed  i f  second  be  the  whether  differ  the  of  Therefore,  found  There  and  not  s u b g r o u p s had  set  the  determine  variables  that  a  cases.  variable  d i d not  together.^  between  While the to  given  and  "case".  significance  since  significantly  one  one  variables  subgroups  categories  even t h e  to  of  i n which  yielded  t h u s 43  the  discrete  interview out  been  i f only  were a s s o c i a t e d ,  in various  test  into  variable,  was  the  have  d a t a as  t h i s s i t u a t i o n , two  i f subgroups of  variable. was  each r e l e v a n t  of v a r i a b l e s  strongly.  their  the  filled  a n a l y t i c a l problem  pairs  associated  could  o f measurements i s termed a  The  how  simplify  divided  Every  useable questionnaires,  selected  To  whose measurement  interval level  categories,  answers.  theory,  the  test. variables  association) numerical  calculations of  were  association  variables  c a r r i e d o u t by c o m p u t e r .  between a n y c r o s s t a b u l a t e d  was e s t a b l i s h e d  statistical  measures:  chi-square,  C r a m e r ' s V, and p h i . are of  s i m i l a r i n that crosstabulated  association.  by s e v e r a l  Chi-square  The pair of  nonparametric  Fisher's  exact t e s t ,  and F i s h e r ' s  exact  both t e s t the s t a t i s t i c a l  variables,  degree  test  independence  b u t do n o t show t h e d e g r e e  The C r a m e r ' s V a n d p h i m e a s u r e s  of  were  6 included  for the latter The  statistical  square  statistic,  ance.  For this reason,  iations final  which  i s not revealed  test statistics.  purpose. measures a r e based i s a two-tailed  on t h e c h i -  test of  the d i r e c t i o n a l nature by an e x a m i n a t i o n Hence,  signified  of assoc-  o f only the  i t was n e c e s s a r y t o a l s o  7  display  the contingency t a b l e '  tabulation  so t h a t  were a s s o c i a t e d . the  cell  of a table,  percentage category,  which  differences  Percentage  conveys  was made e a s i e r  allowing  observed  i t cannot  differences.  by  computing  comparisons  of  between a l l c o l u m n s o f a n y row between a l l rows o f any column  differences  are a simple  categories  by  measure  emphasizing  o f one v a r i a b l e o f t h e second  disadvantage o f the percentage itself,  cross-  f o r the f r e q u e n c y v a l u e o f  i n the categories  of various  by e a c h  show how t h e v a r i a b l e s  the concept o f a s s o c i a t i o n  differences  proportion  by  thus  and s i m i l a r l y  category.  The  Inspection  would  row a n d column p e r c e n t a g e s  each  any  inspection  produced  test the l e v e l  difference  in their  variable. i s that  of significance of  63 2. L o g i c  o f the Q u a n t i t a t i v e I t was  Analysis  phase  d e s i r a b l e t o e v a l u a t e the  before seeking other a s s o c i a t i o n s new  hypotheses.  was  first, divided  which would  To a c c o m p l i s h t h i s ,  the  i n t o s e v e r a l groups.  primary independent v a r i a b l e s  core hypotheses  list  variables  w i t h c e r t a i n dependent  each o f t h e s e v a r i a b l e s measured  c h a r a c t e r i s t i c s of the  which c o u l d  There was be d e s c r i b e d  these were the The  f i r m which c o u l d  between cases w i t h r e s p e c t  experiences.  as  financing variables  f i n a n c i a l experiences,  crosstabulated  an  t e s t e d when the  and  The  a n a l y s i s a f t e r a primary and The  i n the a s s o c i a t i o n  between the  variables.  secondary v a r i a b l e  o f the v a r i a b l e s  are  brought  a dependent v a r i a b l e  q u e s t i o n i s whether they  involved  from  secondary independent  i n t e r m e d i a t e r o l e , and  I f any  primary  with selected variables  have been t e s t e d .  other  in a test,  intervene  crosstabulated i s not then the  becomes c o n d i t i o n a l upon the a s s o c i a t i o n variable.  cause  dependent v a r i a b l e s .  f i n a n c i a l experiences.  v a r i a b l e s play  to  a l a r g e r t h i r d group o f  main hypotheses are  v a r i a b l e s are  i n t o the  important  (TYPORGN, CORPAPLN, EMPLOYMT, PRELDIVN,  differences  the  four  w e l l , t h e r e were s i x secondary independent  SITEHQ, RESIPRIN), and specific  variables  (BANKDIST-A, BANKLIST-B,  hypotheses when c r o s s t a b u l a t e d As  of  There were  REGION, REMOTNES), each o f which i n v o l v e d  variables.  suggest  independent hypothesis  of that  secondary  64 The w i t h the  s e c o n d a r y v a r i a b l e may  primary v a r i a b l e .  In  "be s t r o n g l y  the  present  associated  survey,  this  q could  be  called  a  ' s a m p l i n g e r r o r *^ s i n c e  number o f  c a s e s meant t h a t  one  influence  of  v a r i a b l e by  In  these  the  cases,  secondary one  could  Independent v a r i a b l e s  not  i n any  could  not  discern  the  restricted  test  the  holding between  test involving a  i t  constant.  the  two  dependent  variable. The where t h e  other  type  secondary  to  two the  other  i s not  assumption  equal.  This  latter  in  that  only  the  is  placed  type  one  3.  required causal  Interpretation  ulationsi  Table  The in  T a b l e 4.1  To  use  being  the  relating  according  things  are  is less  serious  to  tell  variable  primary v a r i a b l e In  with  e i t h e r case,  more  which f a c t o r a c t u a l l y  force of  the  of S t a t i s t i c a l  financial  Results  of  was  experience. Crosstab-  4.1 crosstabulations  means o f t h e  table,  tested  the  situation outlined  uncertain.  r e s u l t s of the by  situations  r e l a t i o n s h i p w i t h a dependent  dependent v a r i a b l e s are  significant  tested  interference  i n doubt, whereas i n t h e  d a t a w o u l d be  with  hypothesis  a l l other  above, a l l r e l a t i o n s h i p s o f the  the  the  being  that  of  concerns  i s associated  Once a g a i n ,  variables  implicit  intervention  variable  dependent v a r i a b l e . the  of  one  i s the  statistics  must remember t h a t  hypothesis  of  "no  are  summarized  described the  earlier.  hypothesis  differences",  that  65 i s , no association between the affected variables.  If  this test hypothesis can be rejected with a high confidence level (customarily taken to be .05 or less), then the alternative hypothesis of association is accepted.  In  preliminary research of the present sort, there seems to be no reason why the .05 significance level should be insisted upon, since a significance level of .10 or even .15 may  indicate weaker associations which deserve  further study.  In Table 4.1,  the level of significance i s  given by the topmost of the two groups of figures entered in each c e l l of the table.  The bottom figure indicates  the strength of the association. The use of Table 4.1  is illustrated in the  following example: (1) Hypothesis (alternate): The further a businessman from an IDB branch office, the less likelihood that past loan discussions would have been held with them. (2) Variables:  independent (REMOTNES), dependent  (Q17DHDB) . (3) Test result significance = .95.  The test  hypothesis of no association (of past loan discussions with accessibility) is accepted (see row 26, column 4 of Table 4.1).  Note that i f association had been  found, reference would have had to be made to the contingency table (not shown), to inspect the nature of the association.  66 (4) Check for intervening variables (a) Association between test independent variable and other independent variables (sample error): inspect column 4, rows 1-10 (Table 4.1).  This  shows four associations (REGION, EMPLOYMT, PRELDIVN, SITEHQ). (b) Association between test dependent variable and independent variables other than test variable:  inspect row 26, which shows two  intervening variables (TYPORGN, CORPAPLN). (c) Conclusion:  the hypothesis (Q17DIIDB,  REMOTNES) was not s t r i c t l y tested, due to the unknown influence of intervening variables.  'Table  4.1  L E V E L OF S I G N I F I C A N C E OF TEST HYPOTHESES, STRENGTH OF ASSOCIATION, FOR CROSSTABULATIONS OF SURVEY VARIABLES  AND  SECONDARY INDEPENDENT VARIABLES  PRIMARY INDEPENDENT VARIABLES  BANKDIST.A BANKDISTQuestlon # BANKDI3T-. 7  ,09 * .38 (1)  ,49 » ,25 (1)  22 • ,35 (1)  ,47 * .20 (1)  THE SPACB FOLLOHNG EACH NUMERICAL ENTRY IS CODED TO IDENTIFY THE TEST STATISTIC: 1) blank or * —  ,00 • ,65 (1)  Chi-square  li)  (1)  —  Cramer's V  ill)  (2)  ~  Phi  IT)  (3)  —  F i s h e r ' s Exact Test  v)  nt  —  r e l a t i o n not t e s t e d  REGION 15  09 ' 38 (1)  22 * 35 (1)  REMOTNES 16  49 * 25 (1)  ,47 « .20 (1)  .00 * .65 (1)  TYPORGN 1  61 « .22 (1)  ,92 * .10 (1)  .91 .19  • (1)  ,46 » ,20 (1)  CORPAFLN 2  ,78 * ,20 (1)  ,45 * .25 (1)  ,38 * ,31 C D  ,47 « .25 (1)  45 * ,25 (1)  EMPIOYMT 3  38 « 35 (1)  .58 * .31 (1)  .26 * .36 (1)  ,02 « .48 (1)  ,02 « ,48 (1)  ,00 « ,55 (1)  PRELDIVN 4  15 • 35 (1)  ,28 • .24 (1)  .56 « .26 (1)  .04 « , 3 8 (1)  .53 * .17 (1)  .33 * ,28 (1)  (1)  SITEHQ 5  ,52 • .22 (1)  .38 * .21 (1)  ,21 • .36 (1)  ,03 • .39 (1)  41 « 20 (1)  ,44 • ,24 (1)  (1)  .34 .14 ( D  RESIPRIN 6  ,65 « .19 (1)  .82 « .09 (1)  ,05 • ,46 (1)  .44 * .19 (1)  25 « ,25 (1)  ,01 » ,50 (1)  (1)  .92 .01  MTEGRTN 4  .50 « .31 C D  ,40 • ,26 C D  ,48 * .37 C D  .28 « .30 (1)  ,63 ,21  • CD  .07 * .46 (1)  .19 .49  (1)  CLOSBANK 8  .01 * .50 ( l )  .38 • .21 C D  .69 • .22 (1)  .45 .19  • CD  ,08 » ,34 (1)  .81 * .14 (1)  .35 .35  (1)  QUALCOMP 10  .35 » .27 (1)  .02 • .40 (1)  .23 • .35 (1)  .07 • ,34 (1)  ,74 * .11 C D  .45 • .24 C D  I —  no t e s t , a l l oases i n a l l c a t e g o r i e s o f one v a r i a b l e ooour i n one category o f other v a r i a b l e . more than 20 p e r cent o f expected v a l u e s were 5 o r flower 0  CD  nt  0  .02 .53  CD  .20 .34 C D  • 91 .01 (2)  .91 .01  (2)  .82 .03 ( 2 )  .17 .42 (1)  .55 .09  (2)  .21 .18 ( 2 )  .83 .03  (2)  .50 .40 ( 1 )  .13 .35  (3) C2>  .05 C3) .47 ( 2 )  .65 .05  (3) (2)  .42 .33 (1)  .71 .05  (2)  .71 .05  .73 .05  (2)  BANKCOMP 11  ,17 * .41 C D  .20 (3) .28 (2)  .77 * .30 C D  .05 * .54 C D  ,45 * ,28 (1)  ,05 « .54 (1)  QUALSUBJ 12  .18 • .33 C D  .53 » .17 (1)  .24 * .35 C D  .43 • .19 (1)  .21 * .26 (1)  ,76 .16  .72 • .12 C D  .63 • .14 (1)  .89 * .12 (1)  .79 .24 ( 1 )  .87 .02 (2)  .87 .02 (2)  » CD  0  .92 .01 (2)  (2)  .84 .03 ( 2 )  EXPBSUBJ 13  .12 C D  ,38 (1)  .43 * .30 C D  MANAGERS 14  .87 • .21 C D  ,11 * ,42 C D  .48 » .34 (1)  .28 • .33 C D  ,75 .23  • (D  .62 " .27 (1)  .73 .34 C D  .34 .32 C D  .77 .18 C D  .08 .45 C D  Q17L0CF0 17  .78 » .15 C D  .95 * .04 C D  .79 .19  .76 .11  .69 .13  * CD  .30 • ,28 (1)  .03 .53  .63 .07 ( 2 )  .63 .07 ( 2 )  .98 . 0 0 (2)  Q17LITFC 17  .48 • .23 C D  .27 • .24 (1)  .63 • .24 C D  .32 • .22 (1)  .26 • .30 (1)  .03 .52 ( D  .69 .05  (2)  .21 .18 ( 2 )  .83 .03  .69 .05  .39 .12 ( 2 )  Q17DISFC 17  .48 • .23 C D  .69 .13  • CD  • CD  .61 « .24 (1)  * CD  .12 .31 C D  (1)  •  (2)  .44 .19 C D  .32 * .22 C D  .24 .31  • (D  .16 .42 ( D  (2)  .67 .06 C2>  .41 * .20 (1)  .26 * .30 (1)  .28 .38 C D  .72 .05 ( 2 )  .72 .05 (2)  .92 .01  (2)  .16  CD  .07 * .39 C D  .50 .10 ( 2 )  .50 .10 (2)  .83 .03  (2)  Q17L0CRN 17  .26 • .30 (1)  .38 • .21 C D  .21 * .36 (1)  .23 .25  Q17LITRN 17  .20 • .32 C D  .48 • .18 (1)  .50 • .27 (1)  .51 .17 C D  CD  .11  CD  Table 4.1 ( c o n t i n u e d ) ft.31  Q17DISRN 17  .11 * .37 (1)  .00 .52 (1)  .32  * .23 (1)  .90 .06 (1)  .01 * .49 (1)  .57 * .29 ( 1 )  .86 .02 (2)  .86 .02 (2)  .90  .32 (1)  24  Q17L0IDB 17  .10 .37 (1)  .07 .35 (1)  .12 .40 (1)  .99 .01 (1)  .25 .25 (1)  .73 * .17 (1)  .58 .29 ( 1 )  .44 .11 (2)  .34 .14 (2)  .68  25  0.17LIIDB 17  .41 .25 (1)  .04 * .38 (1)  .45  .99  * (1)  .00 * .53 (1)  .24 .39 (1)  .92  .01 (2)  .92 .01 (2)  .68 .06 (2)  26  H17DIIDB 17  .20 # .32 (1)  .14 .30 (1)  .12 .41 (1)  .95 .04 (1)  .05 .36 (1)  .03 .44 (1)  .11  .90 .01 (2)  .51 .10 ( 2 )  .97 .00 (2)  27  Q17L0C0B 17  I  I  I  I  I  I  I  I  I  I  28  0.171ITCB 17  .70 .18 (1)  .73 .11 (1)  .17 .38 (1)  .66 .13 (1)  .07 (1)  .00 * .69 (1)  .01 * .56 (1)  .78 .04 (2)  .78 .04 (2)  .35 .14 (2)  29  Q.17DISCB 17  1  I  I  1  I  I  I  I  I  I  30  EXPNSION 18  .65 .19 (1)  .38 * .21 ( 1 )  .35 .31 (1)  .58 .15 (1)  .38 .21 ( 1 )  .34 .27 (1)  .02 .55 (1)  .01 (2)  .92 .01 (2)  .47 .10 (2)  31  TESTPLAN 19  .67 .21 (1)  .70 .14 (1)  .18 .42 (1)  .37 * .23 (1)  .85 .09 (1)  .32 .31 (1)  .28 .42 (1)  .83 .03 (2)  .73 .05 (2)  .44 .12 (2)  32  GENSORCE 20  .80 # .16 (1)  .92  .78 * .22 (1)  .74 (1)  .57 .18 (1)  .13 .40 (1)  .15 .48 (1)  .36 .15 (2)  .57 .09 (2)  .12 .26 (2)  APPROPIN 21  .92 .12 (1)  .92 .06 ( 1 )  .77 .12 (1)  .35 .25 (1)  .34 .31 (1)  .32 .41 (1)  .60 .08 (2)  .73  .03  .30 (1)  (2)  .37 (2)  OONTAOOB 22  .15 * .40 (1)  .60 .17 (1)  .27 .39 (1)  .07 .40 (1)  .66  .53 .26 ( 1 )  .76 .28 (1)  .49 .11 (2)  .82 .03 (2)  .02 .40 (2)  COHTAIDB 22  .27 * .34 (1)  .50 .20 (1)  .05 .54 (1)  .60 * .17 (1)  .37 .24 (1)  .47 * .28 (1)  .25 .45 (1)  .15 (2)  .45 .13 ( 2 )  .26 .19 (2)  CONTACRN 22  .48 .27 ( 1 )  .61  .17 (1)  .04 .55 (1)  .23 (1)  .62 * .17 (1)  .00 * .60 (1)  .42 .39 ( 1 )  .81 .04 (2)  .54 .10 (2)  .95 .00 (2)  37  COHTACPC 22  .04 .50 (1)  .02 * .48 (1)  .09 .49 (1)  .40 * .23 (1)  .49 * .21 (1)  .27 .34 (1)  .70 .30 (1)  .17 .23 (2)  .93 .01 (2)  .48 .12 (2)  38  CONTAOTH 22  .48 .27 (1)  .90 .08 (1)  .69 * .26 (1)  .03 * .46 (1)  .01 .52 (1)  .46 .28 (1)  (2)  .49 .11 (2)  .95 .00 (2)  Q23CHBNK  .81 * .23 (1)  .66 .21 (1)  .23  .44 (1)  .21 * .32 (1)  .96 * .10 (1)  .50 .31 (1)  .30 (1)  .31 .29 (1)  .28 .30 (1)  .11 * .71 (1)  .00  1.0 (1)  .02 .83 (1)  .72 * .33 (1)  .58 * .37 (1)  .85  * (1)  .59 .47 (1)  .15 .61 (1)  1  1  I  I  * .22 1.0 (1)  .22 1.0 (1)  .64 .35 (1)  .11 .72 (1)  3  .66 ( 3 ) .50 (2)  23  33 34 35 36  39  23  40  Q23IDB 23  .06  (1)  ft .55  #  ft  41  Q23ROYNT 23  .19 1.0 (1)  .22 1.0 (1)  42  Q23PINOO  .03 1.0 (1)  .23  .22  23  43 44 45  .01  .25 .25  ft .88  .13  .30  .16  (1)  .45  (1)  ft .92  ft .38  ft.47 ft .14 .37 (1)  ft.88  .25  .25  1  I  I  .22 1.0 ( 1 )  .66 (3) .50 (2)  . 3 3 (3) 1.0 (2)  .49  .30 .63 (1)  .83 ( 3 ) .20 (2)  .74  (1)  (1)  .54 .44 (1)  (1)  .65 * .40 (1)  .20 (3) 1.0 (2)  .65 # .40 (1)  .39 .61 (1)  I  I  I  I  .75 ( 3 ) . 3 3 (2)  ACCPTUNS 25  .60  (3) .40 ( 2 )  1  .17 1.0  .66  (3)  .63  (2)  .60  (3)  .40 (2)  .83 ( 3 ) .20 (2)  I  .20 ( 3 ) 1.0 (2)  I  I  I  .05 (2)  .74 .05 (2)  46  POSTPONE 27  I  I  I  47  BONDSHAR 28  .93 .10 (1)  I  .51 .27 (1)  .19  .27 (1)  .00 .60 (1)  .64 .19 (1)  .58 .30 (1)  .13 .30 (1)  CONTRMAT 28  .60 .24 (1)  .03 .40 (1)  .31 .33 (1)  .04 .33 (1)  .83 .16 ( 1 )  .83 .20 (1)  .89 .26 (1)  .32  .28 (1)  .32 (1)  49  CONTEQUP 28  .67 .21 (1)  .86 .12 <i>  .81 .22 (1)  .42 .21 (1)  .81 .13 ( 1 )  .76 .19 (1)  .86 .25 (1)  .26 .25 (1)  .13 .30 (1)  50  VENDPIN 28  .20 .31 (1)  .07  .03 .44 (1)  .64 .17 (1)  .43 .21 (1)  .35 .28 (1)  .41 .34 (1)  .72 .12 ( 1 )  .12  LEASED 28  .15 .33 (1)  .76  MERGERS 28  .68  48  51 52  .31  (1)  ft .83  .18 (1)  *  ft.74  ft .23 ft .48  « .24 (1)  ft .15  .29 (1) .47  .73 (1)  .24 (1)  .75 .15 ( 1 )  .50 .19 (1)  .50 * .25 (1)  .91 .23 ( 1 )  .28 .24 (1)  .25  .13 ( 1 ) .35 .22 ( 1 )  .51 .27 (1)  .31 .23 ( 1 )  .02  .22  .42 (1)  .32  .18 .42 (1)  .80 .03 (2)  .76 .04 (2)  (1)  (3)  .50 (2)  ft .22  .31  I  .40 (1)  .35 (1)  .33 (3) 1.0 (2)  .63  .08 (1)  1.0 (1)  .79 (1)  1  ft .91  .13 .75 (1)  .64 (1)  .66 (3) .31 (2)  (2)  1.0 (1)  ft .64  .64 .35 (1)  REASUNS 24  .06  ft .22 ft .22 ft  .06  1.0  .06  (2)  ft .43  .47 * .50 (1)  Q230THER 23  (1)  (1)  .29  * (1)  .01  .25 (1)  ft  .18 ( 1 )  ft  .65 .14 (1) .36 .13  (2)  69 4. Summary of Problems in the Quantitative Analysis A check of whether minimum requirements of the chi-square test s t a t i s t i c had been violated showed that most of the tables should not be evaluated with the chi-square s t a t i s t i c , because of the rule that the expected c e l l frequency should not f a l l below 5 in more than 20 per cent of the c e l l s .  Most violations of the  rule were gross (e.g.; 33 per;cent or more cells affected), and for this reason the alternative of Yate's correction was not applied. An alternative was to combine categories of the offending variables to reduce the number of cells with low expected frequencies.  The number of variables  which could have been collapsed without obscuring  the  meaning of remaining categories was limited (see Appendix A).  Further, regarding those variables which could be  collapsed slightly without a loss of meaning (EMFLOYMT, BANKDIST, REMOTNES), the effects on the level of generalization made this partial solution of dubious value. A review of alternative tests of significance suitable for nominal data was u n f r u i t f u l .  The  statistics  applied appeared most suitable even though the problems associated with the smallness of the sample could not be overcome. further,  The rigorous analysis could not proceed parts of this analysis were very useful in the  qualitative appraisal of the survey results, reported in the next section.  70 Q U A L I T A T I V E SURVEY FINDINGS 1.  Introduction The  purpose  central  thesis  (a) Are they  the  available.  conclusions  based  this  insight  on  2.  of  General  (a)  was  no  thesis  Results  Chartered The  familiar  a l l of the  loan  tendency  approach a  institutions  information  g e n e r a l l y does n o t  above q u e s t i o n s .  o f the  place  yield  general the  As  economic surveyed  i n perspective  well,  environment firms,  the  and  relative  hypotheses. f o r Various I n s t i t u t i o n s  banks interviewed  policies  for their  distance  f u r t h e r away  projects?  r e l a t i o n s h i p s , however, i t  the  businessmen  with  increasing  to  on  forestry, particularly  the  when  distance?  or proven  d i s c u s s i o n should  merit  distance  for capital  information  a d e s c r i p t i o n i s given affecting  by  l e n d i n g methods o f f i n a n c i a l  was  This  does p r o v i d e  for finance  a f f e c t e d by  evaluation  the  questions:  search  adversely  firm  s e c t i o n i s t o answer  businessmen handicapped  (b) A r e  The  of t h i s  from  of  chartered  knowledge t o banks.  from bank b r a n c h e s chartered  without  exception  banks,  diminish  However,  the  so  were  there  with  businessmen  showed a l e s s e r t e n d e n c y  bank when r e q u i r i n g a  loan.  On  71  the whole, 63 per cent o f the respondents i n d i c a t e d  that  they used the most a c c e s s i b l e bank branch, and both  facts  l e n d support t o the f r i c t i o n Those businessmen  who  of distance hypothesis. d i d not p a t r o n i z e the most  a c c e s s i b l e branch o b v i o u s l y d i d not c o n s i d e r d i s t a n c e as important as o t h e r f a c t o r s .  The reasons f o r t h e i r  b e h a v i o r are r e l e v a n t . S i x businessmen  (of sixteen) i n d i c a t e d that a  s i g n i f i c a n t reason f o r b y p a s s i n g c l o s e r branches was  that  t h e i r r e l a t i o n s a t one branch had been e s t a b l i s h e d f o r a long period of time.  I f the branch r o u t i n e l y g r a n t s  them a good c h a r a c t e r r a t i n g , the s e l e c t i o n o f banking point i s j u s t i f i e d  i n terms o f the f a v o r a b l e treatment  received.  f a c t o r which  is  Another  t h i s response b r i n g s up  t h a t once r e l a t i o n s are e s t a b l i s h e d , the passage  of  time p e r m i t s an a c c u m u l a t i o n o f knowledge, good w i l l , e t c . , which overcomes d i s t a n c e Nine p r i n c i p a l s  problems. i n d i c a t e d that they  with high d i s c r e t i o n a r y lending l i m i t s . believed  chose a branch  These  respondents  t h e r e f o r e , t h a t t h e r e were b e n e f i t s from  dealing  w i t h a branch h a v i n g an e x p e r i e n c e d manager w i t h h i g h e r l e v e l s of a u t h o r i t y . manager was  Two  others f e l t that t h e i r  more p r o f i c i e n t  branch  than managers a t o t h e r branches,  and t h r e e respondents r e p o r t e d t h a t because  they d e a l t w i t h  a p a r t i c u l a r banking company, they could not u t i l i z e c l o s e r branch without s w i t c h i n g banks. out o f seven o t h e r reasons c i t e d between banks:  a  Finally, six  involved competition  the p a t r o n i z e d bank gave a more f a v o r a b l e  deal. of a can in  In  summary, t h e  friction largely  of distance  be  Those  f o r most  cases  dealing with  situations  at  least  second  or t h i r d  branch, switch  cent  once t o g e t  indicated  of a  per  that  the  the  (Table  friction  was  4.2).  This  of distance  Bank c o m p e t i t i o n activities  o f the  of the  longer  bank.  In  Canadian it  is affiliated  vast  Mercantile  deposits,  marketing  market. term in  but  This  of  give  term-lending.  an  the  supports in  to  The  a  data  nearest  the  to hypothesis  banking.  influenced This  by  bank c a u s e d  to the  largely  some  patronized  differs  from  other  Canadian-owned, bank w h i c h  i n business  securities  to  As  take  disbursements  i n the  bank a l o w e r p r o p o r t i o n important  has  lending.  money f o r l o a n  obviously  and  tried  going  exercise i t s right  issues of  had  to attempt  Mercantile  experience  the  firms  from  a l a r g e American  instead raises  liabilities,  Bank.  in relation  does not  large  firm  notably  A l t h o u g h now with  competition  d e a l by  supply  was  presented  same p r o p o s a l .  relation  respects,  international  well,  by  various  sampled  propensity  Mercantile  distances  banks.  the  the  patterns  bypassed.  a better loan  f u r t h e r the  greater  contention  where l a r g e d i s t a n c e s  of the  bank w i t h  to the  i n terms o f t h e o r y  many i n t e r v e n i n g b r a n c h e s were Over 4 6  cases  i n b a n k i n g demand  rationalized  C h a p t e r Two.  accounted  exceptional  capital of  short-  consideration  73 4.2  Table  CROSSTABULATIONi WHETHER TWO BAJ/KS WERE EVER APPROACHED WITH SAME LOAN PROPOSAL, VERSUS HIGHWAY MILEAGE TO NEAREST BRANCH BANK  BANKDIST -B  QUALCOMP  COUNT ROW PCT COL PCT TOT PCT  4" ""5  UP TO MILES  TO 2 4 " 25  TO 6 0 "  " -ROW  i 9  11  0  33 V3  73.3  0.0  18  4  1  66.7  26.7  100.0  27 62.8  15 34.9  1 2.3  APPROACHED; 2 BNK :  ONE BANK ONLY  COLUMN TOTAL CHI SQUARE = CRAMER'S  V =  TOTAL  7 . 0 9 1 8 8 WITH 2 DEGREES OP FREEDOM SIGNIFICANCE = 0.0288 0.40611  20 46.5 i  23 53.5  i 43 100.0  74 I n d i c a t i o n s wrere t h a t aggressive of the  study,  Columbia, a  competitor  f o r medium-term  this  bank had  from  this  and  specialized  M e r c a n t i l e BankC/swas an  team was  o n l y one  central  office  location  o f f o r e g o i n g t h e o r y was  that  of shading r i s k  suggested several  through  investment  implicit  prediction  of this  type prob-  appraisals  the  case,  of  as i s  comments made by  mentioned  time  British  because o f lower  not  a paraphrasing of  s u b j e c t s who  An  improved  T h i s a p p a r e n t l y was by  in  the  (Vancouver),  institutions  would have h i g h e r l o a n s t a n d a r d s  character.  At  d i s p a t c h e d to i n v e s t i g a t e  p r o p o s a l s anywhere i n t h e p r o v i n c e .  ability  loans.  one  of  dealing with Mercantile:  "The company had been d e a l i n g w i t h ... [bank] , b u t t h e y were d r a g g i n g t h e i r f e e t on t h e p r o p o s a l . IDB had l e t s e v e n o r e i & h t months go by w i t h o u t a y e s o r no answer. The f i r m a p p r o a c h e d M e r c a n t i l e , who gave an a n s w e r w i t h i n s i x weeks o f t h e f i r s t c o n t a c t . IDB w a n t e d q u i t e a b i t by way o f s e c u r i t y , b u t t h e y w o u l d l i k e l y had t a k e n i t i f t h e y h a d n ' t b e e n so s l o w . " Mercantile totally other  new  investment  institutions  could not  Bank was  a b l e t o move q u i c k l y  situations  had  avoided.  What i s s u g g e s t e d ,  institution  knows what  investment,  make a p o s i t i v e It charged  role  perhaps,  decision  without  seems r e a s o n a b l e 1  i n none o f t h e  cases  between o f f e r s  from  in  which  assessments their  i s that  when  an  i n f o r m a t i o n i s r e q u i r e d to a p p r a i s e  i t can move i n , c o l l e c t  a higher r i s k  t o make l o a n s  Character  have p l a y e d a s i g n i f i c a n t  decisions.  an  and  into  that  premium surveyed  two  undue  information  and  procrastination.  M e r c a n t i l e would  than was  the  o t h e r banks i t a matter  b a n k s - - i t was  have  because of  either  choosing take  75 Mercantile's did  and t h e r e f o r e  the t h e s i s The  of  However, M e r c a n t i l e  with effects  by c o m p e t i t i o n .  involved  were n o t 'as e x t r e m e , criteria  H  scale,  areas where  the differences i n  o f bank m a n a g e r s  requested  with different  offer  i n the a t t r a c t i o n  of  s u b j e c t s who h a d n e g o t i a t e d  bank m a n a g e r s t o g i v e an o p i n i o n on  w h e t h e r t h e r e were n o t i c a b l e  differences  f o r extending c r e d i t .  the  subjects indicated  and  t h e r e was l i t t l e  the  various regions.  interview  on m a r k e t  branches.  Question  criteria  contradiction  On a n o t h e r  explanation f o rvariations  particular  loans  operated i n apparent  foregoing dealt  credit-granting  another  the e n t i r e  hypotheses.  banks caused  distances the  o r n o t expand.  d e v e l o p a market a r e a encompassing  province of  offer  report  Overall,  i n the managers' two-thirds of  they had p e r c e i v e d such  variation  i n these r e s u l t s  The f o l l o w i n g p a r a p h r a s e  was t y p i c a l  differences,  o f many  subjects'  over from an attitudes:  "He s a i d he h a s n ' t d e a l t w i t h s e v e r a l b r a n c h e s o f t h e same bank, b u t a t h i s b r a n c h he s u r e h a s n o t i c e d a d i f f e r e n c e i n t h e m a n a g e r s t h e y p u t i n e v e r y two y e a r s . He s a i d one guy w i l l be h a l f - w a y r e a s o n a b l e a n d t h e n y o u g e t a n o t h e r guy who t i g h t e n s i t r i g h t u p . " 1  The  author's uncertainty  about  knowledge o f t h e o p e r a t i n g environment dispelled factors  d u r i n g the survey.  affecting  as t h e f o l l o w i n g  o f banks  Surprising  s e r v i c e from paraphrase  businessmens •  b a n k s was  demonstrates:  insight  was into  encountered,  76  "The respondent said that the truckers he has working for him cannot seem to get a nickel out of his own hank at . He felt that the problem was that the community i s 90 per cent , [two large corporations] . These are very stable accounts and the manager does not really have to be very alert for the branch to show a profit.< He w i l l not take a chance on anything small like the loggers. What the respondent does i s send them to [another community] He said i t i s a l i t t l e further to drive, but they are treated well, and usually get what they want. The [second] manager, at the same banking company, has a quite different set up; his branch has no single large account and he i s sharp because he has to deal with hundreds of small accounts who are in a l l sorts of businesses. By contrast, the other manager has i t easy, and won't put out much effort or interest." In addition to recognizing the effect of the local business environment on branch operations, there was no mistaking some businessmen's awareness of differences in the personalities and business attitudes of managers: "He said that even though the banking environment was the same for the various banks, you had to realize there was a world of difference in what the various men would do for you. Some guys w i l l be very polite, f i l l out a l l the forms and ship the request away very efficiently, and when the answer comes back 'no', they w i l l just explain this to the customer. Other guys would be pushing your case, bending this or that rule to try another approach, and w i l l get the loan made even under the same regulations. He said that their banker was one of the pushers and shovers, and that i f he were otherwise, they would change banks promptly. About ten years ago the manager of their bank, who was an older man, had questioned: 'Why do you want to expand more? You're big enough now.' He said: 'Bang, that was i t for him!'" The comments showed as well that there were differences in what was expected of their branch managers. One subject commented on the transfer of the former manager by noting the loss of financial advice which had been used by the company:  77 "The r e s p o n d e n t commented t h a t t h e r e i s a t e r r i b l e d i f f e r e n c e between m a n a g e r s . P o r y e a r s t h e y had a m a n a g e r whose name was , and he knew l o g g i n g , s a w m i l l i n g , t h e m a r k e t f o r f o r e s t p r o d u c t s , and a l s o a b o u t f i n a n c i a l m a t t e r s w h i c h were o u t o f t h e lumberman's scope. He was a good manager and t h e y d e p e n d e d on h i s a d v i c e an a w f u l l o t . When t h e y were w r o n g on something o r o t h e r , he w o u l d t e l l them s o , and why t h e y were w r o n g . The r e s p o n d e n t s a i d t h a t no m a t t e r how s m a r t you a r e , and e x p e r i e n c e d i n t h e l u m b e r i n d u s t r y , t h e r e a r e t i m e s and o c c a s i o n s when you can s t a r t a bad p r o j e c t . At t h e s e t i m e s i t h e l p s t o h a v e a k n o w l e d g e a b l e b a n k e r on hand. The p r e s e n t manager i s n o t t h e same. He d o e s n ' t u n d e r s t a n d f o r e s t r y , and w h a t e v e r t h e y s a y i s o k a y w i t h him. I t i s t h e same w i t h t h e r e g i o n a l o f f i c e , t h e y w i l l okay i t as w e l l . The f i n a n c i a l a d v i c e t h e y u s e d t o g e t j u s t i s n ' t t h e r e now, and t h e y have t o p u t up w i t h t h e uncertainty." R e l i a n c e upon was  not  common t o a l l f i r m s .  director felt  good b r a n c h m a n a g e r s f o r f i n a n c i a l  o f one  that  of  people  the problems  F o r example,  the l a r g e s t  companies  i n the branches  f a c e d by  large  the  advice  financial  i n the  sample  lacked understanding  b u s i n e s s e s , and  i t was  of  better  to d e a l w i t h the banks' r e g i o n a l h e a d - o f f i c e s . Perhaps (and  t h e most  consistent  other institutions)  companies critical perceived  i n the of the t o be  A particularly attitude  came from  sample. degree  The  criticism the ranks  banks  o f the l o g g i n g  l o g g e r s were u n i f o r m l y  o f knowledge o f t h e i r i n d u s t r y  h e l d by n e a r l y a l l b r a n c h articulate  i s r e v e a l e d by  of  account  the  bank m a n a g e r s .  of the reasons  following  segments o f  for  this  one  interview report; "He s a i d he l o o k s a t i t t h i s way; i n t h e b e g i n n i n g a l o g g e r s t a r t s o f f w i t h some b a s i c e q u i p m e n t , s a y $50,000 w o r t h . He may n o t be an i n e x p e r i e n c e d man i n l o g g i n g , b u t he w i l l n o t have c r e d i b i l i t y y e t w i t h f i n a n c i a l i n s t i t u t i o n s , l a r g e f o r e s t r y companies, o r o t h e r l o g g e r s . By c r e d i b i l i t y i s meant t h a t t h e o p e r a t i o n i s s o u n d , r u n f a i r l y e f f i c i e n t l y and m o s t o f a l l , t h a t t h e l o g g e r p a y s h i s b i l l s on t i m e and can be d e p e n d e d  78 u p o n t o do s o . A f t e r t i m e g o e s "by he m i g h t g e t b i g g e r and w i l l have e s t a b l i s h e d h i m s e l f as an o p e r a t o r , b u t i n t h e b e g i n n i n g he has t o go t o t h e h i g h e r c o s t money sources'-and pay on t h e o r d e r o f 14-15 per cent f o r h i s capital. I f t h e l o g g e r can a v o i d a m a j o r p i t f a l l , n a m e l y committing too l a r g e a p o r t i o n of h i s earnings to equity p a y m e n t s , he m i g h t be a b l e t o s u r v i v e t h e i n i t i a l d i f f i c u l t expansion p e r i o d . He s a i d t h a t t i m e and t i m e a g a i n he s e e s t h i s h a p p e n , when a company commits i t s e l f h e a v i l y ( f o r e x a m p l e , d u r i n g good y e a r s ) , and d o e s n ' t s u r v i v e t h e bumps t h a t a r e a h e a d . He s a i d t h a t t h e p o s i t i o n o f t h e l o g g e r i m p r o v e s c o n s i d e r a b l y i f he has e s t a b l i s h e d c r e d i b i l i t y a s an o p e r a t o r , and can go t o a f i n a n c i a l i n s t i t u t i o n w i t h a s o l i d c o n t r a c t which w i l l ensure use o f h i s equipment f o r f i v e years or so. He s a i d t h e c o n t r a c t has t o be a s o u n d one, w i t h c l a u s e s b u i l t i n w h i c h a l l o w f o r t h e i n c r e a s e d c o s t s t o t h e l o g g e r , and so on. with this c o n t r a c t and c r e d i b i l i t y , t h e b a n k s w i l l l o o s e n up and give a better l i n e of c r e d i t . However, he s a i d you a r e never r e a l l y safe. The m a t t e r o f n e g o t i a t i n g a c o n t r a c t is a tricky thing in i t s e l f . W e l l - e s t a b l i s h e d companies w i l l s o m e t i m e s go i n t o s i t u a t i o n s where t h e y r e a l l y shouldn't have. The p r o f i t a b i l i t y o f a l o g g i n g show d e p e n d s on a l o t o f d i f f e r e n t t h i n g s : the geography o f t h e s i t e , s l o p e , s i z e o f t r e e s , c o s t o f m a k i n g r o a d s , and so o n . I t i s v e r y d i f f i c u l t to judge a l l o f t h e s e f a c t o r s and some p e o p l e a r e n ' t v e r y g o o d a t i t . Prom t h e v i e w p o i n t o f b a n k s and o t h e r f i n a n c i a l i n s t i t u t i o n s , t h e w h o l e m a t t e r i s c o m p l e t e l y i n the d a r k , and t h e y r e a l l y d o n ' t know whether, t h e d e a l i s a r e a s o n a b l e one o r a p o o r one. ... S o m e t i m e s , n o t k n o w i n g a n y t h i n g o f t h e l o g g i n g show i t w i l l i n v o l v e , an i n s t i t u t i o n w i l l e n c o u r a g e c a p i t a l i n v e s t m e n t on the b a s i s o f a c o n t r a c t , and i f t h e show was l e s s p r o f i t a b l e t h a n e x p e c t e d , t h e o p e r a t o r w i l l be i n t r o u b l e i n due t i m e . ... He s a i d t h a t t h e b a n k s a r e v e r y h i t - a n d - m i s s i n t h e i r u n d e r s t a n d i n g o f the l o g g i n g b u s i n e s s . He d e a l s with [bank] a t a main b r a n c h , where t h e m a n a g e r i s e x t r e m e l y knowledgeable about the l o g g i n g b u s i n e s s and knows t h e f a c t o r s which; can a f f e c t i t . " The  foregoing  relationship:  the  quotations  credit  o f f i c e r must  degree o f knowledge  on  to' d i s c e r n r e l e v a n t  information  it.  Distance  the  illustrate  industrial  considerations  arid^ t o  were o n l y  an  have a sector  important high  t o be  able  correctly interpret of  secondary  79 consideration, remained  provided  i n the The  the  same g e n e r a l  need  f o r growth of  relatively  few  credit  balance  inability  to  between  cope w i t h  was  the  direction  learned  the  logging  credit the  and  other  These e r r o r s o c c u r  of  since  of providing  restraint.  uncertainty,  sources  particularly  industry,  capable  o f undue r e s t r a i n t ,  about the  officer  region.  managers are  w o u l d make more e r r o r s . in  credit  f o r h i g h knowledge i s not  beneficial  optimal  knowledgeable  Given managers  particularly  assuming  financing for  that  what  logging  contractors i s v a l i d . Before note that several of  from  banking,  competition  political  i t i s worthwhile  e v e n t h o u g h some c o m p e t i t i o n  r e s p o n d e n t s were s t r o n g l y  opinions  one  passing  are  between b a n k s  important  expression.  interview  record  critical  evident, the  degree  i n B r i t i s h Columbia.  These  because o f t h e i r The  was  to  of  recurring  following abstractions  illustrate  the n a t u r e  of  from  these  opinions} "He f e l t t h a t t h e b a n k e r s were g o i n g t o h a v e t o change t h e i r method o f o p e r a t i o n . He s a i d t h a t a t t h e W e s t e r n P r e m i e r s ' C o n f e r e n c e t h e m a j o r i s s u e was t h a t b a n k e r s were g o i n g t o have t o pay more a t t e n t i o n t o t h e w e s t , o r o t h e r b a n k s were g o i n g t o have t o come i n . He s a i d t h a t t h e s e ..things p r o b a b l y c o n t r i b u t e t o t h e e a s i n g o f the s i t u a t i o n f o r the west. ... He s a i d t h a t i s t h e s i t u a t i o n we h a v e . I t was e x a c t l y t h e same way i n e a r l y C a l i f o r n i a . . . . The b u s i n e s s m e n i n t h e w e s t had t o d e a l w i t h b a n k s c e n t e r e d i n t h e e a s t , and t h e s i t u a t i o n was f o u n d t o be u n s a t i s factory. O v e r t i m e , a n o t h e r i n s t i t u t i o n grew up w h i c h s a t i s f i e d p e o p l e i n the west....  an  80 He s a i d t h a t i n h i s m i n d t h e r e was no d o u b t t h a t b a n k i n g was t o o c e n t r a l i z e d i n t h e e a s t , and t h e good p e o p l e who a r e a b l e t o make d e c i s i o n s a r e s o o n s e n t down t h e r e as w e l l . He f e l t t h a t t h e b a n k e r s d i d n o t take one s t e p on t h i s s i d e o f t h e R o c k i e s u n l e s s t h e y r e a l l y had t o , and much p r e f e r r e d t o i n v e s t i n t h e e a s t , c l o s e r to t h e c e n t r a l l o c a t i o n s , where i n v e s t m e n t s a r e probably e a s i e r t o k e e p an e y e o n . He s a i d t h e b a n k s have t o g e t more p e o p l e who can make d e c i s i o n s and p u t them i n t h e west. He s a i d i t i s r i d i c u l o u s t h a t y o u r l o a n a p p l i c a t i o n s h o u l d h a v e t o be s e n t a l l t h e way t o . . . [ a l a r g e e a s t e r n city] for consideration. He s a i d t h a t j u s t a c o u p l e o f y e a r s ago t h i s was t h e c a s e f o r a c r e d i t o f $75,000. He s a i d t h a t amount i s n o t h i n g . " It of there  being  chartered regional banks  be  and  r e l a t e d to u n c e r t a i n t y  Industrial  of  underlying  of investment of  investment  in particular  evaluate  Development  a c t i v e and  sometimes  long-term  supplements  other  sources.  their  limited  The  credit, credit  degree  by in  regions.  banking patterns  at  Bank controversial supplier this  government-sponsored  a v a i l a b l e from  of a c c e s s i b i l i t y  number o f b r a n c h o f f i c e s  p e r i o d i c promotional  smaller  levels  hypothesis  preferences  d i f f e r e n c e s i n the  varying  could not  the  scale of g e n e r a l i z a t i o n .  o f medium and  by  evaluate  r e g i o n a l investment  There are  study  such a broad  institution  to  i n d u s t r i e s concentrated  present  An  difficult  broad  economies,  risk  (b)  be  banks.  could  higher The  would  outlying  visits  communities.  banks  offered  and by  i s supplemented  of r e p r e s e n t a t i v e s  to  81 1) F r i c t i o n  of d i s t a n c e  The affect  by  there  the  cases  nor  had  from  loan  o f IDB,  there  IDB  was  firms  region.  to  greater  This  a p p r o a c h IDB IDB  Friction  granting  shows t h e  IDB. cent  might  d i d not  less  other  he with  S u r p r i s i n g l y , the  interest  aware  of  knowledge  i n IDB  displayed  Lower M a i n l a n d  these  of  vary  were c o n s i s t e n t l y l e s s  satisfaction  t o see  and  Fraser  h a v e been due firms  sectors  of  received  the  of measuring the  whether or not  f o r loans  was  branch o f f i c e .  between t h e s e  The in  of per  offices  this  Question  in part from  capital  market  Vancouver.  o f demand was  2)  (16.3  IDB  d i f f e r e n c e may  A n o t h e r method  ship  ignorance  i n the  r e l a t i o n s with in  policies  would  was  First,  to r e g i o n a l v a r i a t i o n  markedly  located  Valley  nearest  loan  "branch o f f i c e s .  With regard  firms  located  of distance  institution  literature),  business  '  their  a degree of  the  o f IDB.  the  the  n e i t h e r knew where t h e  independent  the  knowledge o f  was  read  distance  by  friction  several different, questions.  dealt with  While  that a  p o t e n t i a l customers o f t h i s  assessed 17  contention  o f demand  propensity  r e l a t e d to d i s t a n c e The  data  of  showed no  distance to  from  the  relation-  factors.  of distance contention loans  the  friction  was  of that  supply distance  assessed  findings with  respect  would a f f e c t  i n Question to these  23.  two  the  IDB  Table  4.3  factors.  82 Table  4.3  CROSSTABULATION: OUTCOME OP APPROACH TO INDUSTRIAL DEVELOPMENT BANK ( I D B ) POR A LOAN ON MOST RECENT EXPANSION PROJECT, VERSUS DISTANCE TO NEAREST IDB OFFICE  REMOTNES COUNT ROW PCT COL PCT TOT PCT  1 TO 10 MILES  11 - 100  101-250  ROW TOTAL  I  Q23IDB SATISFACTRY LOAN  3  2  1  75.0  50.0  50.0  I  6 60.0  I  i  0  1  0  0.0  25.0  0.0  LOAN' REFUSED  i  1 UNSATISF'TRY  OFR  COLUMN TOTAL CHI SQUARE = CRAMER'S V =  1 10.0  _  1  1  25 .0  25.0  50.0  4 40.0.  4 40.0  2 20.0  1  2.08333 WITH 4 DEGREES OF FREEDOM SIGNIFICANCE = 0.7204 0.32275  NUMBER OF MISSING OBSERVATIONS  = 33  3 30.0 I 10 100.0  83 T h e r e was n o t a l a r g e e n o u g h s a m p l e t o draw f i r m clusions,  b u t no a s s o c i a t i o n seems e v i d e n t .  explanations  of this  finding  arose  from  con-  Certain  comments o f  subjects. Firstly, granting  loans,  shade r i s k so  on.  I D B was s a i d  and t h e r e f o r e would  because  of confidence  It i s significant  a p p r o a c h i n g IDB obtained compared  t o 93 p e r c e n t A  distance to  second  that  only  f o r chartered  term  o f those  loan,  banks.  Moreover, with  takes  months),  o r otherwise,  b a n k s , who  further breaking  time  as l o n g as i t i su n l i k e l y  c o u l d have  IDB a l s o a p p a r e n t l y  chartered  thus  considerable  Over p e r i o d s  (up t o f o u r t e e n  t h a t many f a c t o r s , l o c a l  information,  60 p e r c e n t  f a c t o r m i t i g a t i n g the i n f l u e n c e o f  encountered  extensively  in  be u n l i k e l y t o  a satisfactory  new a p p l i c a t i o n s .  overlooked.  standards  i n t h e p r i n c i p a l s , and  was t h a t t h e i n s t i t u t i o n  evaluate  those  t o have h i g h  could  been  co-operates supply  local  down a n y f r i c t i o n  of  distance. In  conclusion,  the I n d u s t r i a l Development  d i d n o t seem t o be s i g n i f i c a n t l y considerations. institution eliminate it  specifically  credit  has a p o l i c y  small  Granted,  gaps,  demand-based possibly  charged with  spatial  responsibility to  or otherwise.  travelling  and w h i l e  friction,  a f f e c t e d by a c c e s s i b i l i t y  i t i s a government-sponsored  o f sending  communities,  effective  Furthermore,  representatives to i n reducing  the s c a l e o f t h i s  w o u l d be v i e w e d  Bank  latter  practice  as u n e c o n o m i c a l by p r i v a t e  84 financial institutions. (c) Roynat Ltd. There were Roynat branch offices in only two of the regional centers (Vancouver, Prince George), therefore the available distance measures did not accurately reflect the distance of each firm from a Roynat o f f i c e . In the place of distance measures, variations in credit are discussed with respect to general differences between regions. F i r s t l y , with respect to friction of distance of demand, knowledge of Roynat's loan policy showed some association #o region.  In a l l three sub-questions  on this  matter (Question 17), the Kootenay region showed a low degree of awareness of Roynat, and the Prince George region showed high awareness.  Unexpectedly, Lower  Mainland and Fraser Valley firms did not exhibit much interest in Roynat, despite the fact that a main branch is located in Vancouver (see Table 4.4).  The situation  was similar to that for IDB» where firms accessible to Vancouver showed less interest. Apart from the exception for Vancouver, Table  4.4  suggests that i f there are no permanent branches of an institution anywhere in the general region, the friction of distance of demand w i l l be more apparent.  Occasional  v i s i t s are made to larger outlying centers by Roynat o f f i c i a l s , and this may explain why some outlying/firms had held discussions with the institution.  85 The  question  Roynat v a r i e d w i t h evaluated,  o f whether p r o p e n s i t y  accessibility firms  had  More l o o s e l y e v a l u a t e d ,  there  seemed t o  to  accessibility,  a p p r o a c h i n g Roynat George r e g i o n , The  The  would n o t  firms  had  firms obtained  permit  Roynat  any  the  firms  a  satisfactory  than  in periods  questionnaire.  supply  relation-  recently  the  Prince  The  Only  loan.  involvement these  few  prior  author  was  since one  of  I t should i n the  these be  forest  contacts  noted, industry  illustrate.  to that reviewed the  loans.  only  firms mentioned  gained  a  o f Roynat  evaluation,  o f a number o f o t h e r  loans  contact.  some  whether t h e r e  approached Roynat.  more e x t e n s i v e  Principals  was  affecting  however, t h a t R o y n a t * s was  be  s a m p l e were from  second q u e s t i o n  of distance  three  strictly  where a b r a n c h i s l o c a t e d .  friction data  be  demonstrated  s i n c e a l l of the  i n the  approach  could not  few  ship  s i n c e so  to  obtaining in  impression  the that  i Roynat operated but  was (d)  quite  throughout  selective  Commercial Finance  the  in i t s  Finance  Province  Companies  province  addition  to  centers,  e q u i p m e n t d e a l e r s u s u a l l y have  with to at  a finance least  one  chartered  q u i t e as  over the  the  branch o f f i c e s  banks.  dispersed  However,  in various  of  this  in  regional  arrangements  company, g i v i n g m o s t b u s i n e s s m e n institution  loans,  investments.  c o m p a n i e s were n o t as  in granting  type.  access  86 Table  4.4  CROSSTABULATION: WHETHER FIRM HAD AT ANY TIME DISCUSSED. BUSINESS LOANS WITH O F F I C I A L S OF ROYNAT L T D . VERSUS REGIONAL CENTER CLOSEST TO THE FIRM  I REGION COUNT ROW PCT COL PCT TOT PCT  ROW TOTAL  Q17D1SRN YES  NO  COLUMN TOTAL CHI SQUARE = CRAMER * S V =  4.88230 WITH 2 DEGREES OF FREEDOM SIGNIFICANCE = 0.3215 0.32999  87 The from  other  relevant question institutions  companies  because o f  relations  with  The policies  data  showed  on  finance  companies.  Bank,  associated the  businessmen  for  Development  about  businessmen Bank.  However,  enough to  l e s s a c c e s s i b l e to  be  on  their  to the  chartered  greater propensity  hypothesis  supplement the a l s o probed financed  finance  IDB,  latest  was  not  to  project,  supported  Industrial  the  data  the  extent  capital  as with  Development  contention use  support  review, that  finance was  not  there  For  slightly  was  current  supported  f o u n d was  vendor-  probable  the  finance  some s u p p o r t  The  had  both chartered  r e m o t e b o r r o w e r s * a r e more companies.  situation,  to which firms  goods t h r o u g h  companies.  results  f o r the  r e m o t e f i r m s w o u l d d e a l more w i t h To  to  loan  however.  historically  that  The  to a c c e s s i b i l i t y  survey  and  true  somewhat  companies  shows.  To the  companies'  b a n k s were more i n f o r m e d  were  f i r m s who  approach finance  respect  unsatisfactory  association strong  banks a l s o d e m o n s t r a t e d  4.5  finance  significant.  Sampled  Table  finance  same was  the  remote  lenders.  hypothesized,  Industrial  c a s e was  firms  t o d e a l more w i t h  awareness o f  The  whether  (hypothesized)  chartered  f u r t h e r away from  statistically  their  t h a t , as  away f r o m  neither  tended  l o w e r c o s t term  further  in  was  for  contention companies.  the  constrained  reason  t h a t a number o f  banks  greater  subjects  Table  4.5  CROSSTABULATION: WHETHER FIRM APPROACHED A FINANCE COMPANY FOR A LOAN ON LATEST EXPANSION PROJECT VERSUS HIGHWAY MILEAGE TO NEAREST CHARTERED BANK BRANCH  COUNT ROW PCT COL PCT TOT PCT CONTACFC  BANKDIST -B UP TO 4 MILES  5 TO 24  NO  ROW TOTAL i  1  YES  25 TO 60  6  0  5.6  46.2  0.0  17  7  1  94.4  53.8  100.0  7 21.9 i i  25  78.1  i  COLUMN TOTAL CHI SQUARE = CRAMER'S V =  18 56.3  13 40.6  7.56903 WITH 2 DEGREES OF SIGNIFICANCE = 0.0227 0.48635  NUMBER OF MISSING OBSERVATIONS  = 11  1 3.1 FREEDOM  32 — 100.0  89  suggested that dealing with a finance company was sometimes preferable to dealing with a lower cost loan source. "He said that the difference between a bank and a finance company was, f i r s t of a l l , the cost of Hie loan is higher from "a commercial bank [finance company] , but the chartered banks tend to tie up a l l of your machinery for security just to finance one new machine. The finance companies never do that. The only way around the problem, he-supposed, was to have very good relations with the bank." 1  1 0  The foregoing suggests that the strategic benefit from dealing with a finance company may costs.  outweigh the higher  With so many unexpected downturns in the industry,  when things do go bad, the company doesn't l o s e ' a l l of i t s assets, only those currently financed.  Other res-  pondents were pleased with the low degree of interference by finance companies in management affairs of the borrower: "He said that the situation with the finance companies was different in some ways. As long as you make the payments, they never bother you. The banks, on the other hand, w i l l occasionally ..Step in and request you to take some'action or another." y  "He said that he would never go to a bank for a term loan ... because banks are by nature a short-term lender. Their l i a b i l i t i e s and deposits are short-term and their loans have to be as well. He said that i f there was one criticism he were to make of banks, i t would be that in times of easy money they w i l l encourage you to make a term loan. However, in a year or two, when money is tight, they w i l l be watching over your shoulder, reminding you and worrying about the loan, even though they do not take the drastic step of calling i t in ... He said i t i s better to relieve yourself of this pressure by dealing with a term-loan lender. Roynat and the finance companies, IAC, say, do not bother you with changes in credit conditions or anything like that. As long as you meet the payments and loan obligations you are your own boss."^ u  Other respondents suggested that high interest rates did not concern them too much because these were business  expenses for income tax purposes. In the f i n a l analysis, though, only 28.6 per cent of the firms approaching a finance company for a recent loan were satisfied with the outcome.  This was the-  lowest ratio for Hie various types of institutions, and one would infer that finance company loans are not preferred by most businessmen. (e) Alternative Sources of Finance The objective of Question 28 was to discover whether firms inaccessible to low-cost lenders had placed greater reliance upon alternatives. were inconclusive.  The results  There was a tendency for firms  further from chartered banks to use contractors, but a decreasing tendency for them to use leasing. A second measure of accessibility was given by distance to IDB offices.  Here there was less reliance  on contractors with increasing remoteness, contrary to the hypothesis.  Similarly, there was a lower reliance  on leasing with increasing distance.  The above findings  are explained partly by the fact that the more remote firms on average were smaller.  They would be less  l i k e l y to make efficient use of contractors or leased equipment, regardless of accessibility. 3.  Overview of Forest Industry Changes Previous sections of this chapter presented some  of the detailed thesis findings. Because the approach  91 was to examine results of particular questions, these sections as a whole did not provide an overview of the broad forces which have shaped the forest industry. Yet, such an overview i s necessary, particularly to evaluate finance problems in the context of other significant factors which are unique to the forest industry. By the late 1960's, "the B.C.. forest industry had lost the expansive drive which,had characterized i t s development for over two decades. appear to be temporary.  The trend does not  The primary cause of slower  growth was that the industry had reached the limits of i t s raw materials,  i t could not continue harvesting  timber at an increasing rate without facing absolute future decline.  In recognition that forest reserves  were becoming depleted, the forest service instituted a system of sustained yield cutting rights allocation in the 1960's. The provincial regulations ensured that in aggregate, the industry would be able to operate at given level of activity for an indefinite period of time.  One  of the side-effects of this policy was that larger, expanding firms became more interested in purchasing smaller saw mills or logging operations, etc.; ^solely for the purpose, of acquiring more timber rights.  In the mid-  1960's, a number of pulp mills were built, creating additional demand for wood fibres particularly in the form of sawmill/planermill byproducts, i e . , sawdust and woodchips.  When the pulp mills attempted to secure  92 adequate wood supplies, another wave of take overs of smaller mills was set off, once again to secure more cutting rights. During this period, hundreds of small mills l i t e r a l l y disappeared.  One respondent noted that  in the Kootenay region alone, over 60 mills' closed during the last decade. Most of the mills which were bought were simply closed down and the log supplies directed to large forest industry complexes in central locations.  This led to  a loss of jobs, since the larger mills required far fewer employees for the same production level.  It also  meant that small outlying communities lost much of their basic industry.  In one instance, a respondent  pointed out where two mills were bought by a giant forestry firm, then closed out and consolidated into a complex in a larger community.  The respondent said there  was a net loss of some 100 jobs, and businesses in the small community were soon closing their doors. Around 1970, provincial regulations were passed which disallowed unconditional private transfer of timber rights.  Upon sale or cessation of a company, timber  rights would henceforth revert to the crown. In addition, i principals wishing to s e l l their company were required to seek prior approval of the minister.  In practice,  these regulations meant that the forest service would not approve takeovers i f jobs would be lost.  It i s not  surprising that these regulations drastically stemmed the takeovers of small mills.  Existing owners could not  93 guarantee and  as  the  mill  that  one  principal  sales The  would  put  timber  the  decline of  of  smaller  firms  author encountered Canadian  secured  province.  Particularly  (usually  Japanese  recapitalized modernized, result the  and  equalled but  the  environment  Kootenays, was  resource  interest  leases  of  Canadian  medium-sized  cut.  was  would  new  involved  be institutions),  stepped  and  a  up.  boost  communities.  possible apparently the  the the  financial  i n employment  involved,  and  from  considerably  rights.  regions  capital  the m i l l  stop a l l  timber  cases i n v a r i o u s  timber  effect  employment  r e c e n t l y s o l d out  allowable  a significant  over the  various  Expansion  The  because  annual harvest  in  had  is still  not taking  than  cut.  i n the  v a r i a t i o n i n the  regions  f o r example,  difficult  maximum a l l o w a b l e the  desired  periods.  T h e r e was  expansion  the  w i t h i n more c l o s e l y p r e s c r i b e d l i m i t s  earlier  the  was  had  where f o r e i g n  economy o f v a r i o u s  yet  In  few  increase  forest districts  in  a  or American),  increase  supplies,  hot a i r . "  t r a n s f e r s o f the  adequate  the  place,  and  i t s production an  be a v a i l a b l e ,  However, t h e y d i d n o t  (with help  was  production  with  forest industry  owner had  owners had  to  filled  centralization.  where a  The  i t , "without  government r e g u l a t i o n s  stopping  through  t i m b e r alo'ttment  i s j u s t a bag The  of  their  of  several  the  forestry  province.  firms noted  b e c a u s e t h e y were a l r e a d y The  that at  their  more s e v e r e l i m i t a t i o n s o f  Kootenays p o s s i b l y e x p l a i n s  of private f i n a n c i a l  institutions  the  i n the  smaller  region.  94  In place of the private intermediaries, i t was  found  that p u b l i c f i n a n c i a l i n s t i t u t i o n s were strongly  represented.  The federal Department of Regional Economic Expansion (DREE), IDB,  and even the l o c a l c r e d i t unions were very  active in lending to f o r e s t r y firms. In the Kootenays, there tended to be more financing extended within the industry as w e l l .  For  example, contract truck loggers were often accomodated by advances from the sawmill f i n a n c i a l intermediary.  company, rather than a  An extreme l o c a l shortage of  truck loggers had been p r e c i p i t a t e d by the International Woodworkers Association's i n i t i a t i o n of a 40 hour week for employees, and sawmills  were forced to replace former '  operator employees by private contractors to avoid heavy overtime wage payments. was  The shortage of contractors  a l l e v i a t e d by some m i l l s l i t e r a l l y s t a r t i n g up  contracting businesses  for former employees, and  this  close r e l a t i o n s h i p has p e r s i s t e d . The  continued  v i a b i l i t y of the small m i l l s in the  Kootenay region, in the face of a l i m i t e d resource i s probably  base,  explained by the greater a c c e s s i b i l i t y to  the U.S.. market than i s the case for m i l l s in the north central i n t e r i o r . In the Okanagan region, the l i m i t e d timber resources were also a major constraint f o r small m i l l s . Slumps i n the market f o r sawn lumber was as w e l l .  a serious concern  Over a s i x month period, the price f e l l 40 per  then gradually regained  30 per cent.  cent  Under these conditions,  95  the goodwill of the forest service is seen as important by the principals of small companies. province may  For fear that the  believe the company does not require i t s  allocated timber, layoffs of men  (caused by poor market  conditions) are accomplished gradually and without publicity.  On the contrary, when a m i l l is adding  another shift, the whole crew is hired at once and the local media contacted, etc., to ensure that the forest service gets the message. The Okanagan region has strong ties to Vancouver. Equipment parts and other supplies are usually more readily available directly from Vancouver than from the nearest regional center. Many small firms in the Okanagan region have developed sidelines in product specialties which insulate them from the severe fluctuations in the market for housing construction materials.  For example, firms may  have contracts to supply railroad ties, mine timbers, wooden boxes, crates, pallets or other products.  These  contracts allow the small firms to survive the severe demand fluctuations which force many others out of business.  Unfortunately, while such contracts permit  survival, they are a source of additional financing demand. The large companies whom they supply typically pay the accounts 90 days after receipt of goods.  In the interim,  the small m i l l must finance payrolls, etc. through a financial institution.  This procedure marginally increases  the finance available to the railroads, canneries, etc.,  96 at the expense of the small  entrepreneurs.  Prince George i s the hub of the North Central Interior Region, but i t was also found that this region has close ties to Vancouver (for e.g., daily jet airplane services link the two centers).  The forest reserves are  being pushed quite far back, and Prince George has lost i t s frontier image.  While s t i l l dependent upon forestry,  tertiary employment is becoming significant. The forest industry in the North Central Interior is very dependent upon the United States' housing market (approximately  95 per cent of their lumber products), and  is therefore subject to a l l of the imponderable fluctuations of U.S. monetary and housing policies and economic conditions.  general  The pricing system for lumber is  FOB (at point of delivery).  Mills must absorb the  transportation costs, essentially, and this puts the North Central Interior at a disadvantage.  Long distances must  be overcome by r a i l and the freight rates are always subject to increase.  The only costs which can be affected  by management decisions are production costs.  The profit  squeeze has made the northern mills vocal opponents of provincial stumpage fee increases, and they were found to be very hard-nosed with their contractors compared to mills in other regions. In the Lower Mainland and Fraser Valley Region, the search for timber resources had been intense.  One  principal reported spending evenings and weekends over a ten year period, looking up ownership records for  97 alienated lands and contacting the owners f o r possible sale of t h e i r timber. lumber brokers,  Many firms buy the logs from  out of the water.  Although they must pay  premium p r i c e s , these companies fare reasonable w e l l . Often,  they serve the offshore market and are immune to  short-term  U.S. p r i c e f l u c t u a t i o n s . Also, when serving  the U.S. market, t h e i r option of using cheaper water shipment gives them cost advantages over i n t e r i o r m i l l s in serving western markets. Even the smaller firms located i n the Lower Mainland Region were generally well-established and showed l i t t l e i n t e r e s t i n IDB or Roynat, for example.  The  chartered banks appeared to give them wholly s a t i s f a c t o r y treatment.  Various respondents said that there were  bank loans o f f i c e r s i n the Vancouver area who were extremely competent in f o r e s t industry lending, an obviously  important  consideration.  On Vancouver Island, dominance of large  corp-  orations was apparent, and very few independent mediumsized m i l l s remain.  Foreign  c a p i t a l has been used to  purchase and r e c a p i t a l i z e some small but v i a b l e  operations,  and domestic c a p i t a l has been involved i n others.  The  ease of c o l l e c t i n g logs and shipping the f i n i s h e d products by t i d a l waters explains much of the attractiveness of Vancouver Island production  sites.  forests are very productive  on the Island even on a  sustained y i e l d b a s i s .  In addition, the  98  Coastal logging operations were found to be generally inaccessible by car.  Many operations  reached only by float-plane, tugboat or radio.  are Their  head-office functions are performed either at their home or accountant's office, which would be located in an urban center.  Many respondents said that they had as  many contacts directly with Vancouver as with the smaller urban centers located on the Island.  As i t had in a l l  other regions, Vancouver dominated a l l other centers as the hub of communications and travel patterns. SUMMARY The f i e l d work results have been described in this chapter.  Much of the insight acquired was the result of  discussions with respondents rather than analysis of the questionnaires.  The results did not support the hypotheses  as strongly as had been anticipated.  The review of survey  findings was placed in the context of the economic and p o l i t i c a l environment of the forest industry.  The wide  perspective of forestry helped to moderate expectations concerning the real growth potential of smaller forestry firms, taking into consideration a l l of the external forces which are beyond the control of any small firm's management. The uniqueness of the forest industry environment discouraged  the author from attempting to generalize  the survey results to other industries. Next, Chapter Five reviews and summarizes the entire thesis.  99 REFERENCES i A l i s t i n g of the names of these variables  together with their marginal frequencies i s given in Appendix A. In three exceptional questions (nos. 9, 19, 26), each respondent could have correctly selected more than one appropriate response. It was not foreseen that this design would prevent the application of s t a t i s t i c a l analysis to these questions. The problem arose because of the stipulation that the number of observations in a contingency table (see reference 7, below) must equal the number of cases in the sample. Thusly, observations had to be independent, and would not be i f one case were to count as two observations (see also Appendix B). These types of questions are useful in maintaining rapport with interview subjects however, since responses can be more closely tailored to actual situations. •^R. S. Weiss, Statistics in Social Research: Introduction (New York: Wiley, 1968), p. 178.  An  ^Of course, with interval level data, the degree and direction of association (then termed correlation) can be much more neatly summarized in terms of plus or minus correlation coefficients. In the present case, use of plus or minus figures would be often misleading. -'The frustrations of this process were largely eliminated by the availability of the SPSS subprogram "CROSSTABS" on the University of British Columbia's computer installation (IBM System/360). See: N. H. Nie, D. H. Bent, & C H. Hull, SPSS: S t a t i s t i c a l Package for the Social Sciences (Toronto: McGraw-Hill, 1970), pp. 1-128 (especially pp. 115-128); also S. Kita, R. Morley, UBC SPSS: Introduction to SPSS at UBC Vancouver: University of British Columbia Press, 1973), 4 pp. L >  c  A more complete description of these s t a t i s t i c s and their present use i s given in Appendix B. . ^A contingency table i s defined as a joint frequency distribution of two variables showing the simultaneous position of cases on the subgroups of these variables. Q  These variables were independent by definition. That i s , they were deduced to be influential upon financing experiences of companies on the basis of overall knowledge of the situation. However, the relationships were s t i l l somewhat uncertain, and the design only went as far as including these external factors in the analysis. To evaluate these "hypotheses", more study i s required.  100 Q  I t was d e s i r a b l e t o sample a c c o r d i n g t o a h a p h a z a r d q u o t a b a s i s so t h a t t h e m a r g i n a l f r e q u e n c i e s o f t h e c a t e g o r i e s o f any i n d e p e n d e n t v a r i a b l e w o u l d be roughly equal. T h i s e v e n d i s t r i b u t i o n was t o make l a t e r s t a t i s t i c a l m e a s u r e s o f a s s o c i a t i o n more s u i t a b l e t o t h e s m a l l sample. E f f o r t was made t o a p p l y t h i s t o o n l y a few o f t h e i n d e p e n d e n t v a r i a b l e s (REGION, REMOTNES, EMPLOYMT), where f o r e x a m p l e , t h e number o f f i r m s from e a c h r e g i o n was t o be r o u g h l y e q u a l . G i v e n l i m i t e d r e s o u r c e s and d i f f i c u l t c o n d i t i o n s , t h i s form o f q u o t a s a m p l i n g was n o t s u c c e s s f u l l y a p p l i e d and many i n d e p e n d e n t v a r i a b l e s t h e r e f o r e have u n e v e n m a r g i n a l d i s t r i b u t i o n s ( s e e A p p e n d i x A ) , The t e r m " s a m p l i n g e r r o r " was u s e d t o d e s c r i b e t h e s i t u a t i o n s where i n a d v e r t e n t a s s o c i a t i o n s between i n d e p e n d e n t v a r i a b l e s a p p e a r e d because o f s a m p l i n g ; f o r example, i f a l l l a r g e f i r m s came from one r e g i o n . The i n f l u e n c e o f e a c h v a r i a b l e can n o t be s e p a r a t e d i n o t h e r a s s o c i a t i o n s because o f t h e s m a l l n e s s o f the sample. Further, data c o l l e c t e d from any q u o t a s a m p l i n g f r a m e s h o u l d n o t be e m p l o y e d t o make i n f e r e n c e s r e g a r d i n g t h e a c t u a l f r e q u e n c y d i s t r i b u t i o n s of the independent v a r i a b l e s i n the u n i v e r s e p o p u l a t i o n , b e c a u s e t h e s e d i s t r i b u t i o n s were s e l e c t e d at the sampling s t a g e . (In proper quota sampling, m a r g i n a l f r e q u e n c i e s o f t h e s a m p l e a r e made e q u a l t o t h e m a r g i n a l f r e q u e n c i e s o f t h e u n i v e r s e p o p u l a t i o n , so t h e r e d a t a must be a v a i l a b l e from o t h e r s o u r c e s . ) 10 Paraphrased Interview #15. 11 Paraphrased Interview #34. 12 Paraphrased Interview #13. 13 Paraphrased Interview #43. ^Paraphrased I n t e r v i e w #11.  comments t a k e n  from  report  of  comments t a k e n  from  report  of  comments t a k e n  from  report  of  comments t a k e n  from  report  of  comments t a k e n  from  report  of  15 ^ P a r a p h r a s e d comments t a k e n f r o m r e p o r t o f Interview #51. 16 P a r a p h r a s e d comments t a k e n from r e p o r t o f I n t e r v i e w #49. 17 'These p e r s o n s p o s s i b l y were d u b i o u s t h a t a p p r o a c h i n g t h e i n s t i t u t i o n w o u l d be o f any u s e . The r e p u t a t i o n o f IDB amongst t h e p r i n c i p a l s o f f o r e s t c o m p a n i e s who were s u r v e y e d seemed t o h a v e b e e n t h a t t h e i n s t i t u t i o n had f a i r l y h i g h s t a n d a r d s f o r g r a n t i n g l o a n s .  101 18  Paraphrased comments taken from report of Interview #4-7. IQ  ^Paraphrased comments taken from report of Interview #50. on  Paraphrased comments taken from report of Interview #30.  102  Chapter 5 SUMMARY The there  are  business The  purpose of  spatial  the  v a r i a t i o n s i n the  expansion  loans  from  r e l a t i o n s h i p between  valid,  would h e l p  t h e s i s was  to  find  out  whether  availability  financial  finance  explain  to  and  of  institutions.  accessibility,  differing  regional  i f  growth  patterns. C h a p t e r One t e r m s , and  placed  introduced  the  study  development l i t e r a t u r e . the  e f f e c t s of  s p a c e on  and  resolve  study.  Accordingly,  as much f i e l d The participants on  a small  part  these  borrowers.  The  lend avoid  at  system  of i t .  context  of  economic  e c o n o m i s t s have but  the  profit  constructs  i s so  that  than  designed  possible  to  field  to  bring  b e a r on  pervasive  the  i n terms  a n a l y s i s had  to  savings and  to  rates  fully  dispense  ensuring  poor investments.  a  Because  of  as  and of  private  their  fair  such  best uses  i n c e n t i v e encourages  topic.  focus  Financial intermediaries in collecting  debated  literature  of deductive  f u n d s amongst h i g h e s t  competitive on  i n the  issue, rather  as  functions  institutions  losses  general  t h e s i s was  efficiency  allocating  financial  the  information  and  banks a c h i e v e  use  the  financial  in  finance,  involved  to  problem  Regional  reviewed mostly opinions  the  funds,  return, of  and  their  to to  103  importance in the flow of funds, the lending policies and the loan officers of financial intermediaries ultimately "bear heavy responsibility for the forms in which economic growth takes place. finance industry. publicly-owned  Governments closely regulate the They also direct additional funds into  lending institutions to eliminate credit  gaps for borrowers not adequately served by private intermediaries.  The thesis was concerned only with public and  private lending institutions, and the flows of funds into business through brokerage institutions or private investment of savings were excluded from the terms of reference. Lending institutions have market areas from which customers are drawn. The author theorized that two sets of forces result in the market area phenomenonJ  firstly,  a friction of distance affects the loan demand of borrowers, particularly smaller firms, and constrains their credit search to the most accessible institutions; secondly, distance affects the decision-making a b i l i t y of the institution on whether to supply any loan  requested.  The distribution of financial institutions in the system of central places i s uneven, with less of a range and fewer of each type of institution in successively smaller places.  Consequently, i t was f e l t that economic  a c t i v i t i e s further from metropolitan areas would be more l i k e l y to experience slow growth due to insufficient capital.  Therefore, a general model was  formulated  which could be evaluated by f i e l d information.  104  Chapter Two fleshed out the simple model, and introduced various qualifying relationships which could also affect business lending.  These relationships were  abstracted from the literature or discussions with people experienced with finance. Not much interest in the Canadian financial system had previously been expressed by geographers. included Kerr,  1  Exceptions  who had viewed the financial industry as  a component of urban growth processes, but was mostly concerned with the primary (head-office) functions of financial d i s t r i c t s in metropolitan centers.  Similarly,  Code had studied longitudinal trends in the spatial evolution of high-level decision-making,  in terms of  broad underlying factors as the need for financial p  intelligence, and the communications technology.  Code's  work was the f i r s t substantive effort to describe the geography of finance in Canada, and was the f i r s t to point out that information and information transfer mechanisms are crucial factors in the effect of space on the supply of funds.  The author disagreed with Code  primarily with respect to emphasis on the d i f f i c u l t y of collecting relevant information on borrowing businesses, and i t was felt that Code over-simplified the task of collecting on-site information. Prom interviews and published descriptions of the internal administration of lending institutions, other relationships were inferred which could explain why a businessman went to an institution other than the most  105 accessible one.  Prom the answers to questions on these  factors, the relative importance of distance to the demand for finance could be evaluated.  The considerations  included knowledge and previous experience, lending on weight of character, loyalty to particular institutions or individuals, and competition between institutions. Chapter Three explains the methods of data collection.  Basically, interviews were conducted of a  sample of about 50 principals of smaller forest industry companies.  The sample was collected over wide regions of  the province.  The f i e l d information was recorded on  standard questionnaires and separate interview report sheets. Chapter Pour presents the findings of the f i e l d survey.  In the f i r s t section, an explanation is given of  the quantitative methods for analyzing the questionnaires. S t a t i s t i c a l evaluation was not possible because of the large number of variables and the limited sample size. Although the results were not s t a t i s t i c a l l y significant, interesting patterns emerged.  There was  some evidence of a friction of distance affecting demand for bank loans, and some evidence that there was a f r i c t i o n of distance of supply as well.  Por example,  businessmen further from chartered banks were more prone to switch banks for better deals, they tended to know more about higher cost alternatives (finance companies), and also tended to approach finance companies for loans more often.  In addition, they tended to finance equipment  106  through dealers more often and they also tended to use contractors more often than firms who were less remote from banks. . While distance is a factor, i t is evidently not of primary importance judging from the reasons found for not patronizing the most accessible bank branch.  In the  f i n a l analysis, a businessman i s interested in getting the capital he requires, and to achieve this result distances the breadth of the province were travelled by borrowers (and lenders) to close a loan.  Noteably though,  most of the longer distances involved aggressive lending institutions. important  Time and again i t was found that the most  factor of a l l was whether a credit officer  was  competent in evaluating the forest industry. Knowledgeable loans officers are apparently sought out over considerable distances for their interpretative and  decision-making  skills. The Industrial Development Bank apparently was not affected by distance.  No significant tendency for  businessmens demands for IDB loans to vary with distance 1  was perceived, nor a tendency for the supply of loans to have spatial variations. The institution was active in regions avoided by private institutions and although  few  investments were made during the study period, a number of respondents reported past loans from IDB.  Insofar as  elimination of spatial credit gaps i s concerned, the f i e l d survey found no criticism of IDB's effectiveness.  107 However, a number received risk,  not  interfere  complaints,  within a reasonable  but  the  p e r f o r m a n c e and Roynat included  Roynat The  study  access  evaluated.  proposals  The  without  distributed  Generally, businessmen  institutions.  willingly  the  would  Yet, was  decided  and  i n the results tend  only a l i g h t to absorb  utions lending reduce  would  author be  had  the  how  w e l l an  lending.  this  hypothesis  One  f a c t o r w h i c h seemed t o  found.  Loans  could  forest  the  hypothesis  t h e most  compelling  constraint. higher  widely  industry.  supported  a  accessible  force, Many  c o s t s and  businessmen efforts  capital.  that f i n a n c i a l by  not  evaluate;,investment  made a number o f  distance in  instittheir  require information to  the u n c e r t a i n t y of l o a n repayment. support  would  i t was  seemed t o  adversely affected  not  institution  Demand f o r  o f Roynat  hypothesized  did  institution  offices)  f o r adequate  operations, since they  between  expected.  to u t i l i z e  r a t h e r than  of looking further a f i e l d The  had  has  these  term-lending  supply  institution delay  author  of  with a c c e s s i b i l i t y ,  investments  accessibility  had  branch  o f d i s t a n c e on  o f d i s t a n c e on  undertake  d i d I n d i c a t e a gap  to a s c e r t a i n  ( o n l y two  loans varied  effect  that  criticism  were  process  The  validity  Ltd. i s a private  i n the  limited  the  time.  what b u s i n e s s m e n  overcome e f f e c t s  be  w i t h management, o r t o  b a s i s f o r s p e c u l a t i n g on  with  complaints  r e g a r d i n g IDB's w i l l i n g n e s s t o e i t h e r  applications no  of u n s o l i c i t e d  The  results  to a s i g n i f i c a n t  extent.  over-ride accessibility  was  108 whether loans officers were competent and able to make decisions even when circumstances were unusual or complex. A l l of the evidence from respondents suggested that . i f the individual loans officer recognized key factors regarding forest industry success, distance did not unduly hinder a loan appraisal,  competence was a very  personnel-specific factor which a l l but ruled out f r i c t i o n of distance in lending, provided that the capable loans officer remained in the general region of the borrowing company. Although outlying firms were generally smaller, acess to financial institutions was not a convincing explanation of variation in economic growth.  Rather than  absence of growth, the study found that more inaccessible firms had different patterns of capital financing.  Por  example, more reliance was placed upon contractors to provide capital equipment, finance was extended through the industry and public agencies or institutions such as IDB,  credit unions and the federal Department of Regional  Economic Expansion were more involved.  In the absence  of the public institutions, more significant variations in regional economic growth would have been found. The British Columbia forest industry has undergone major structural changes in the past decade.  Although  the study was conducted during a relative upswing when domestic and foreign markets were strong, there was not the potential for rapid expansion which typified preceding years.  Many small firms had disappeared, and their  109 place taken by large well-financed corporations.  It  would have been interesting to study patterns of forest industry finance prior to the early 1960 s, while there f  were s t i l l many small firms struggling to grow larger. The author can see value in further research, particularly historical research perhaps using asprimary data sources retired principals of small forest industry companies.  Another aspect which could bear  further study are channels of communication.  The present  study relied upon distance in the sense of highway mileage, which actually only poorly measured the concept of ease of information transfer. In addition, over 90 per cent of the sampled firms were within 25 miles of a branch of a chartered bank, , The data collected has limitations with respect to the actual inaccessibility of the sample and different results might have been obtained i f more off-highway samples were obtained. The research suggested that competence of loans personnel^was more important  than accessibility.  Therefore,  any future research should, f i r s t l y , measure competence; and secondly, trace the constantly shifting locations of key personnel.  If certain locations seldom had  competent personnel while others always did, there may be spatial s t a b i l i t y in financing patterns over time. The conclusions of the present study may not apply for a l l industrial sectors or regions of Canada.  It is"  l i k e l y that different results would be obtained in other  countries with less developed systems of financial institutions, particularly those which are governmentsponsored .  REFERENCES Donald Kerr, "Some Aspects of the Geography of Finance in Canada," Readings in Canadian Geography, ed. Robert M. Irving (Toronto: Holt, Rinehart and Winston, 1968), pp. 187-201, William R. Code, "The Spatial Dynamics of Financial Intermediaries: An Interpretation of the Distribution of Financial Decision-Making in Canada" (unpublished Doctoral dissertation, University of California, Berkeley, 1971) 2  112 BIBLIOGRAPHY 1. Economic Development. Forest Industry ABC-British Columbia Lumber Trade Directory and Yearbook. Vancouver: Progress Publishing Co. (1958) Ltd., 1970. Berry, Brian J . L., Geography of Market Centers and Retail Distribution. Englewood Cliffs': PrenticeHall, 1967" Brewis, T. N. (ed.). Growth and the Canadian Economy. Toronto: McClelland and Stewart, 1968. . Regional Economic Policies in Canada. Ma cMillan, 1969.  Toronto:  British Columbia Lumberman. Vancouver: Journal of Commerce Ltd., various issues. British Columbia Lumberman Greenbook. of Commerce Ltd., 1973.  Vanouver:  Chorley, R. J., and P. H. Haggett (eds.). Geography. London: Methuen, 1967.  Journal  Models in  Code, William R. "The Spatial Dynamics of Financial Intermediaries: An Interpretation of the Distribution of Financial Decision-Making in Canada." Unpublished Doctoral Dissertation, University of California, Berkeley, 1971. Davis, L. E., J . R. T. Hughes, and D. M. McDougall. American Economic History. Homewood: Irwin, 1965. Dreese, G. Richard, "Banks and Regional Economic Development," Southern Economic Journal, Vol. 40, No. 4 (April 1974), pp. 647-656. Economic Council of Canada. Queen's Printer, 1968.  F i f t h Annual Review.  Ottawa:  "For the Record," Canadian Forest Industries. Don M i l l s : Southham Business publications Ltd., various issues. 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As quoted 1.  i n Financial Post,  January  13,  G r o s s , H. F i n a n c i n g f o r S m a l l and Medium B u s i n e s s . Englewood C l i f f s : Prentice-Hall, 1969. Holladay, J . The C a n a d i a n B a n k i n g S y s t e m . B a n k e r s P u b l i s h i n g Co., 1968.  Boston:  H o r t o n , D. C. P a t t e r n s o f Farm F i n a n c i a l S t r u c t u r e : C r o s s - S e c t i o n V i e w o f E c o n o m i c and P h y s i c a l Determinants. Princeton: Princeton University Press, 1957.  A  K o e r n e r , M. M. L o n g Term D e b t and E q u i t y C a p i t a l A v a i l a b i l i t y to S m a l l B u s i n e s s . A b r i e f prepared f o r s u b m i s s i o n t o t h e R o y a l C o m m i s s i o n on B a n k i n g and F i n a n c e . Toronto: unpublished manuscript, 1962. M a c G l b b o n , D. A. R e p o r t o f t h e Commission on B a n k i n g a n d C r e d i t Wi Fh R e s p e c t t o t h e I n d u s t r y o f A g r i c u l t u r e i n the Province o f A l b e r t a . Edmonton: unpublished report, 1922. :  M e y e r , J . R. and Economics.  T971.  Muir,  J . F. Kain Cambridge:  J. The C a n a d i a n Canada, 1956.  N e u f e l d , E . P. MacMillan,  (eds.). Essays i n Regional Harvard U n i v e r s i t y Press,  Banking  The F i n a n c i a l 1972.  System. System  The  Royal  o f Canada.  Bank o f Toronto:  S e a r s , J . T. I n s t i t u t i o n a l Financing of Small Business i n Nova S c o t i a . Toronto: U n i v e r s i t y of Toronto Press, 1972. S i r k i n , G. I n t r o d u c t i o n t o Macroeconomic HomewoocT: I r w i n , 1970. 3. S t a t i s t i c s  and A n a l y t i c a l  Theory.  Techniques  B u r t o n , T. L . and G. E . C h e r r y , S o c i a l R e s e a r c h T e c h n i q u e F o r P l a n n e r s . London: George A l l e n & Unwin L t d . ,  TWT.  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An  APPENDIX  L I S T I N G OP V A R I A B L E & SHOWING M A R G I N A L  A  CATEGORY N A M E S , FREQUENCIES  117 Variable  Questionnaire #,..creases  Variable/ Category Name ( s h o r t ) TYPORGN  1 43 3 35 5  Prop' o r Partner Closehld corp'n Wideheld corp 'n CORPAFLN  2 43 23 10 8 2  Independent Has s u b s i d iary i s a subsidiary Both o f preced'g  Extended  No.  Label  GENERAL TYPE OP BUSINESS ORGANIZATION P r o p r i e t o r s h i p or p a r t nership C o r p o r a t i o n , l e s s than 10 s h a r e h o l d e r s C o r p o r a t i o n , more than 10 s h a r e h o l d e r s  5  AFFILIATIONS WITH OTHER COMPANIES No a f f i l i a t i o n s Has a t l e a s t one s u b s i d i a r y company As s t a t e d .  6  Both i s a s u b s i d i a r y and has i t s own  EMPLOYMT 0- 25 J 4 26-75 15 76-150 V" §' 151-300 7 5 301-500 3 over 500  SCALE OF PEAK EMPLOYMENT As s t a t e d . As s t a t e d . As s t a t e d . As s t a t e d . As s t a t e d . As s t a t e d .  7  PRELDIVN  WHETHER FIRM CONSISTS OF ONE OR MORE DIVISIONS As s t a t e d .  .8  3 43  4 43 ' 27 16  More than one Only one div'n  As  stated.  4 43  NODIVNS  NUMBER OF DIVISIONS  4 27  INTEGRTN  INTEGRATION OF MULTIPLE DIVISION FIRMS D i v i s i o n s were v e r t i c a l l y integrated D i v i s i o n s were h o r i z o n tally-integrated Both o f above  12  Vertical  13  Horizontal  2  Both  •  11  •These q u e s t i o n s could n o t be i n c l u d e d i n the q u a n t i t a t i v e a n a l y s i s , hence they have no v a r i a b l e number.  118 APPENDIX.A:  (continued)  Questionnaire Variable/ Category Name ( s h o r t )  # of Cases I  5 43  Near  16  Separated  prod'tn fns  RESIPRIN 36 7  7  7 43  8 43  SITEHQ  27  6 43  6  Variable  Vicinity Not i n v i c inity  RESIDENTIAL LOCATION OP PRINCIPALS V i c i n i t y d e f i n e d as w i t h i n commuting d i s tance As s t a t e d .  10  *  HIGHWAY MILEAGE TO COMPANY'S BANK As s t a t e d . As s t a t e d . As s t a t e d . As s t a t e d .  1  ARE OTHER BANKS CLOSER? Yes, p a t r o n i z e d branch is not closest No o t h e r s a r e c l o s e r  12  16  Most ible  access-  CHOICBNK  6  Conven't t o ex' Long r e l a t i o n  9  Large  2 4  Good m a n a g e r Nearest o f patr' Other reasons  7  9  BANKDIST-A '  CLOSBANK Not o p t i m a l  2  R E L A T I V E LOCATION OP COMPANY HEAD O F F I C E O f f i c e close to production site Office spatially r e m o v e d from p r o d ' t n site  LOCATION OF ABSENTEE PRINCIPALS  Up t o 4 m i l e s 5-24 m i l e s 25-60 m i l e s o v e r 60 m i l e s  9 43  Label  LOCABSTE  18 18 3 4  27  Extended  No.  branch  REASONS FOR USING LESS A C C E S S I B L E , BANK, Branch convenient to commuting e x e c u t i v e Relationship of long standing Large branch with higher lending limit Good b r a n c h manager C l o s e s t branch o f the p a t r o n i z e d bank Other reasons f o r s e l e c t i o n  *  119 'APPENDIX A :  (continued)  Questionnaire # of Cases  Variable/ Category Name ( s h o r t ) QUALCOMP  10 43 20 23  Yes No BANKCOMP  11 20 12 8  Yes No QUALSUBJ  12 43 41 2  Yes No EXPESUBJ  13 41 32 9  Yes No MANAGERS  14 32 21 7 1 3  Used d i f ' t crit No d i f f e r ences No comp. sit'ns Monetary change REGION  15 43 7 7 12 11 6  Cranbrook Kelowna P r i n c e George Vancouver Victoria REMOTNES  16 43 24 13 6  1- 10 m i l e s 11-100 m i l e s 101-250 m i l e s  Variable  Extended  No.  Label  HAS A SECOND BANK EVER BEEN APPROACHED As s t a t e d . As s t a t e d .  13  SIGNIFICANT DIFFERENCES IN THEIR OFFERS? As s t a t e d . As s t a t e d .  14  IS SUBJECT Q U A L I F I E D TO ANSWER QUESTIONS? As s t a t e d . As s t a t e d .  14  HAS SUBJECT DEALT OTHER MANAGERS? As s t a t e d . As s t a t e d .  16  WITH  ANY DIFFERENCES IN LOAN CRITERIA? Yes, they used d i f f e r e n t criteria No  17  Comparable s i t u a t i o n s c o u l d n o t be r e c a l l e d Situations involved different underlying monetary c o n d i t i o n s REGIONAL CENTER TO HEAD O F F I C E As s t a t e d . As s t a t e d . As s t a t e d . As s t a t e d . As s t a t e d .  CLOSEST  HIGHWAY MILEAGE TO S P E C I F I E D CENTER As s t a t e d . As s t a t e d . As s t a t e d .  3  4  120 APPENDIX A :  (continued)  Questionnaire  16  # of Cases  Variable/ Category Name ( s h o r t )  43  REMOTNES 24 13 6  17  43  Q17L0CFC 40 3  17  43  43  43  43  43  Yes No Q1710IDB  36  1  17  Yes No Q17DISRN  10 33 17  Yes No Q17LITRN  43 23 20  17  Yes No Q17L0CRN  27 16 17  Yes No Q17DISPC  35 8 17  Yes No Q17LITFC  35 8 17  1- 10 m i l e s 11-100 m i l e s 101-250 m i l e s  43  Yes No Q17LIIDB  36 7  Yes No  Variable  Extended  No.  Label  HIGHWAY MILEAGE TO S P E C I F I E D CENTER As s t a t e d . As stated. As stated. AWARE OF LOCATION FINANCE COMPANY As stated. As stated.  '4  OF  18  READ LOAN LITERATURE OF FINANCE COMPANY As stated. As stated.  19  DISCUSSED A LOAN WITH FINANCE COMPANY As stated. As s t a t e d .  20  AWARE OF LOCATION OF ROYNAT O F F I C E As stated. As stated.  ANY  21  READ LOAN LITERATURE OF ROYNAT LTD. As stated. As stated.  22  DISCUSSED A LOAN WITH ROYNAT OFFICERS As stated. As stated.  23  AWARE OF LOCATION ANY IDB BRANCH As stated. As stated.  24  OF  READ LOAN LITERATURE OF IDB As stated. As s t a t e d .  25  121 APPENDIX A:  (continued)  Questionnaire # of Cases  Variable/ Category Name (short) Q17DIIDB  17 43  34 Yes 9 No Q17L0CCB  17 43  43 Yes 0 No Q17LITCB  17 43  42 Yes 1 No Q17DISCB  17 43  43 Yes 0 No EXPNSION  18 43 36 7  Yes No PLANNING  19 35  27 None dropped 4  Feasibility  1 Market 1 Materials 1 Gov't reg'Ins 1 Cost of loan 19 35  TESTPLAN 34 Yes 1 No  Variable No. Extended Label DISCUSSED A LOAN WITH IDB OFFICERS As stated. As stated.  26  AWARE OF LOCATION OF CHARTERED BANK As stated. As stated.  27  REAL LOAN LITERATURE OF CHARTERED BANK As stated. As stated.  28  DISCUSSED A LOAN WITH CHARTERED BANK As stated. As stated.  29  ANY EXPANSIONS PLANNED IN LAST TWO YEARS? As stated. As stated.  30  REASONS FOR DROPPING ANY PLANS? A l l expansion plans carried out Doubts of f e a s i b i l i t y of project Uncertain market Materials supply problem Government regulations: Fisheries Interest charges too high ANY PLANS TO LEVEL OF PLANNING FINANCE As stated. As stated.  *  31  122 APPENDIX A:  (continued) Variable Bo.  Questionnaire Variable/ Category Name (short)  # of Cases  Extended Label  | ORIGINALLY PLANNED SOURCE OF FINANCE 2 Wholly internal No borrowing required 32 Partly external Borrowing required WAS A FINANCIAL INSTITAPPROPIN 21 33 UTION APPROACHED As stated. 32 Yes As stated. 1 No GENSORCE  20 34  CONTACCB  22 32  27 Yes 5 No CONTAIDB  22 32  Yes No  10 22  CO NT A CRN  22 32  3 Yes 29 No CONTACPC  22 32  7 Yes 25 No ' CON TAO TH 22 32 3 Yes 29 No Q 23 CHBNK  23 27  Satisfactory  25 1 1 23 10  Loan.'refused Unsatis. offer  Q 23 IDB 'Satisfactory 6 1 Loan refused 3 Unsatis. offer  32  33  APPROACHED A CHARTERED BANK FOR A LOAN As stated. As stated.  34  APPROACHED IDB FOR A LOAN? As stated. As stated.  35  APPROACHED ROYNAT FOR A LOAN? As stated. As stated.  36  APPROACHED A FINANCE COMPANY FOR A LOAN? As stated. As stated.  37  APPROACHED OTHER SOURCES FOR A LOAN? As stated. As stated.  33  RESULTS OF APPROACH TO BANK? Satisfactory loan received As stated. Unsatisfactory loan received  39  RESULTS OF APPROACH TO IDB? 40 As stated. As stated. As stated.  123 APPENDIX A:  (continued) Variable No.  Questionnaire # of Cases 23  Q23R0YNT  3 1 1 1  23  Variable/ Category Name (short)  Satisfactory Loan refused Unsatis. offer Q 23 PIN CO  7  2 Satisfactory 1 Loan refused 4 Unsatis. offer 23  Q230THER  3  2 Satisfactory 1 Unsatis. offer 24  REASONS  6 5 1  25  High cost Insufficient ACCPTUNS  5  1 Yes 4 No 26  27  PLANCHGE  2 1  Scaled down  1  Supplemented POSTPONE  4  3 Other finance 1 28 42  No borrowing BONDSHAR  2 Yes 40 No  Extended Label RESULTS OP APPROACH TO ROYNAT? As stated. As stated. As stated.  41  RESULTS OP APPROACH TO FINANCE COMPANY As stated. As stated. As stated.  42  RESULTS OP APPROACH TO OTHER SOURCE? As stated. As stated.  43  REASONS WHY THE LOAN OFFER WAS UNSATISFACTORY High cost of the loan pull amount requested not forthcoming  44  DID FIRM ACCEPT THE UNSATISFACTORY OFFER? As stated. As stated.  45  DID ANY CHANGES IN PLANS RESULT? The project continued on smaller scale The offered amount was supplemented by other funds  •  WHAT FINALLY RESULTED FROM DIFFICULTY?' Approached another financ i a l institution successfully Went ahead without borrowed funds  46  HAS FIRM SOLD BONDS OR SHARES TO THE PUBLIC? As stated. As stated.  47  124 APPENDIX A:  (continued)  Questionnaire # of Cases 28 42  Variable No.  Variable/ Category Name (short) CONTRMAT  21 2  Cont.-firm's RM Cont- not firm s 1  3 Both 16 No contractors CONTEQUP  28 42 0  Only processing 6 Tran s portat i on  20 Both 16 No contractors 28 42  VENDPIN  12 Rarely used -6 Often 24 Not used 28 42  LEASED 14 Rarely lease 7 Often 21 Not used  28 42  MERGERS 1 Yes 41 No  Extended Label USE OP CONTRACTORS & OWNERSHIP OP RAW MATERIALS Contractors prepare raw materials owned by the firm Contractors prepare raw materials not owned by the firm Both of above Ownership of materials not stated  48  \  NATURE OP CONTRACTORS' EQUIPMENT Palling, etc. of trees  49  Skidding, yarding, loading, trucking or water transport Both of above categories As stated. ARE PURCHASES FINANCED THROUGH VENDOR As stated. As stated. As stated.  50 1 1  'DOES FIRM LEASE  51  ANY MERGERS IN FIRM'S HISTORY? As stated. As stated.  52  EQUIPMENT? As stated. As stated. As stated.  APPENDIX  B  DESCRIPTION OP S T A T I S T I C S EMPLOYED IN QUANTITATIVE ANALYSIS  126 The following s t a t i s t i c s were a subroutine option of CROSSTABS, given directly in the output together with the contingency table from which the values were calculated. 1. Chi-square-  This s t a t i s t i c tests the independence or  lack of s t a t i s t i c a l association between variables,  when  specified in CROSSTABS, the s t a t i s t i c i s presented along with the more useful level of significance (shown as a decimal percentage, e.g. .08).  The significance figure  indicates the probability of having a distribution as different from s t a t i s t i c a l independence by chance alone as the observed distribution.  The data upon which i t i s  proposed to use the chi-square s t a t i s t i c must f u l f i l l certain requirements: a.  The total number of observations in the contingency  table must equal the number of cases in the sample, and cases roust be independent.  One may not, for  example, l e t one case count as one observation in more than one category of any variable. b.  The chi-square test is properly used only i f  fewer than 20 per cent of the cells in the contingency table have an expected frequency of less than 5, and no c e l l has an expected frequency of less than 1.  (The expected frequency of any c e l l equals the  product of the corresponding row and column totals, divided by the total number of cases in the contingen cy; table..) \  127 The  subroutine automatically  F i s h e r ' s exact t e s t s t a t i s t i c  substituted  i n the  case o f 2 x 2  t a b l e s where the number of cases was In a l l o t h e r 2 x 2 was  The  o f e i t h e r a d d i n g or s u b t r a c t i n g 0.5 computing c h i - s q u a r e , v a l u e s o f one can  l e s s than  tables, yate's corrected  employed whenever n e c e s s a r y .  and  consists  The  correction  only  expected c e l l  s t i p u l a t e d above.  before  expected  be a p p l i e d to t a b l e s l a r g e r than 2 x 2  are 5 o r l e s s , as was  chi-square  i n each c e l l  i s used when the  cent of the  21.  correction  or more c e l l s are too low.  more than 20 per  the  i f not  frequencies  Finally,  because  c h i - s q u a r e measures t e s t f o r l a c k o f a s s o c i a t i o n , do not  i n d i c a t e the degree o f a s s o c i a t i o n , i t  desirable  so.  Cramer's V, p h i -  p h i i s used i n the  contingency t a b l e s t o c o r r e c t that  i t s value i s p r o p o r t i o n a l  cases.  was  to a l s o compute another s t a t i s t i c a l measure  which would do 2.  but  case o f 2 x 2  c h i - s q u a r e f o r the  fact  to the t o t a l number o f  P h i ranges i n v a l u e from 0,  where t h e r e  i s no  a s s o c i a t i o n , to 1, when p e r f e c t a s s o c i a t i o n e x i s t s . Cramer's V i s a p p l i e d (where p h i has and  to a l l t a b l e s g r e a t e r  no upper bound), and  i n t e r p r e t a t i o n o f v a l u e s as p h i .  s a t i s f y the need f o r a s t a t i s t i c o f the  associations.  has  the  than  2x2  same range  These measures  i n d i c a t i n g the  strength  APPENDIX C LETTER OP TRANSMITTAL  THE  UNIVERSITY  OF  VANCOUVER  DEPARTMENT  OF  BRITISH 8,  COLUMBIA  129  CANADA  GEOGRAPHY  Dear S i r : Your co-operation i s needed for a student project. An interview i s sought with a company representative who bears r e s p o n s i b i l i t y i n the area of f i n a n c i a l management and has represented the firm i n contacts with financial institutions. Research i s being conducted on the interaction of a wide sample of forest industry companies with various f i n a n c i a l i n s t i t u t i o n s . The point of-view i s to search for relationships between physical a c c e s s i b i l i t y and differences i n financing experiences. The study i s the subject of a Master of Arts thesis i n economic geography being undertaken at the University of B r i t i s h Columbia. While the questions that w i l l be asked w i l l not require any research, such as into f i n a n c i a l records, the questions do c a l l for private opinions and r e c o l l e c t i o n s of company experiences that are c o n f i d e n t i a l . Considerable planning has been undertaken to ensure that the i d e n t i t y of respondent companies w i l l not be discernable i n the interview record nor the f i n a l thesis document. In keeping with a policy of closely inspecting a l l public surveys to be conducted under i t s auspices, the university administration has assessed the preparation of this study, and unqualified approval has been given by President Gage's o f f i c e . Supporting funds and thesis guidance are being provided by the Department of Geography. Thesis advisors are; Dr. Robert N. North Department of Geography U.B.C. Vancouver  Dr. Kenneth G. Denike Department of Geography U.B.C. Vancouver  I am very hopeful that you w i l l see f i t to support this project and be able to spare a half-hour for the interview. I w i l l be i n your area the week of and w i l l c a l l for an appointment during that time.  Yours sincerely,  A l l a n R. Newell, BA  APPENDIX D QUESTIONNAIRE  131  STUDY OF FOREST INDUSTRY EXPERIENCES WITH FINANCIAL INSTITUTIONS PRIVATE AND  CONFIDENTIAL  A l l respondents should begin with Question u n t i l d i r e c t e d to omit c e r t a i n q u e s t i o n s .  1 and complete the questions i n numerical  order,  P l a c e n t i c k (l^) i n the square next to the appropriate answer, or w r i t e i n Rn answer that i s not among the o f f e r e d a l t e r n a t i v e s . In any w r i t t e n answer, please do not s p e c i f y by name any i n d i v i d u a l person, chartered bank, or f o r e s t i n d u s t r y company. S e c t i o n 1:  CHARACTERISTICS OF THE FIRM  1. What i s the general type of business o r g a n i z a t i o n of your firm? P~| s o l e p r o p r i e t o r s h i p j j partnership | [ c o r p o r a t i o n , with: j j l e s s than 10 shareholders [ | more than 10 shareholders 2. What a f f i l i a t i o n s does the f i r m hive with other companies? [ ] none, the f i r m i s independent | { the f i r m has one or more s u b s i d i a r y company | | the f i r m i s the s u b s i d i a r y of another company 3- What i s the general scale of company employment during months of pe: k operation? employees) • .0 -25 • 76 -150 • 301 -500 • 26 -75 • 151 -300 Q over 500 j  (# of f u l l - t i m e  4. Does the f i r m maintain more than one permanently l o c a t e d d i v i s i o n ? (A d i v i s i o n i s defined to ee a production o p e r a t i o n which f u n c t i o n s as a u n i t , but which i s not i n c o r p o r a t e d s e p a r a t e l y . )  •  «°  [ [ yes, please s p e c i f y how many d i v i s i o n s | ~"] , and whether: Q d i v i s i o n s are v e r t i c a l l y - i n t e g r a t e d (products flow between theno f o r processing) j j d i v i s i o n s are h o r i z o n t a l l y - i n t e g r a t e d (no product flow between d i v i s i o n s ) 5. I s the h e a d - o f f i c e l o c a t i o n shared by any major production o p e r a t i o n of the firm? • •  no 7"  6. Wh.a t i s the general r e s i d e n t i a l loc? t i o n of the p r i n c i p a l s * ? f i residence i n v i c i n i t y of h e a d - o f f i c e residence elsewhere  If resident i n :  Canada. . s p e c i f y c i t y USA • s p e c i f y sta te other.. . s p e c i f y country  * D e f i n i t i o n of p r i n c i p a l s : i ) small and medium companies- owners and key f i n a n c i a l employees i i ) l a r g e r , p u b l i c companies- d i r e c t o r of f i n a n c e , other executive o f f i c e r s and d i r e c t o r s The above question w i l l be used to evaluate whether some f i r m s i n remote l o c a t i o n s are i n f a c t supported by p r i n c i p a l s who maintain high personal access with l a r g e r urban c e n t e r s , thus g i v i n g t h e i r firms greater access to f i n a n c i a l i n s t i t u t i o n s th^n would otherwise be the ca  132  Section 2:  EXPERIENCES WITH CHARTERED BANKS  7. Could you e s t i m a t e the d i s t a n c e between the company's h e a d q u a r t e r s and bank which handles the company's banking a f f a i r s ? |  | m i l e s by highway  (rounded o f f t o the nearest  8. Are t h e r e o t h e r branches o f any branch s p e c i f i e d above? •  no  Q  yes  (PLEASE OKIT QUESTION  5  the branch of the  chartered  miles)  c h a r t e r e d bank l o c a t e d a p p r e c i a b l y c l o s e r t o the f i r m t h a n  the  9)  (PLEASE ANSWER QUESTION  9)  9. What are the reasons f o r u s i n g the chosen branch, g i v e n the a l t e r n a t i v e c h a r t e r e d bank branches which are c l o s e r ? ( i n d i c a t e a l l a p p l i c a b l e answers) | | the branch being p a t r o n i z e d i s q u i t e convenient, o f the e x e c u t i v e s of the f i r m  c o n s i d e r i n g normal b u s i n e s s  travel  | | t h e banking r e l a t i o n s h i p o f the f i r m was e s t a b l i s h e d many y e a r s ago and i t i s not to sever t h i s r e l a t i o n s h i p i n o r d e r t o g a i n a more convenient banking p o i n t | | the chosen branch i s one of the l a r g e s t branches i n the a r e a and considerable authority i n h i s organization | | the manager o f the p a t r o n i z e d bank i s an a c t i v e and capable man o t h e r bank managers i n the area or t h a t one has known  | | a s t a n d i n g p o l i c y o f the f i r m i s to d e a l with a p a r t i c u l a r c h a r t e r e d c u r r e n t l y p a t r o n i z e d i s the c l o s e s t branch of t h e i r o r g a n i z a t i o n |  10.  11.  | other reasons  no  •  yes  (PLEASE OMIT QUESTION  14.  the  branch  the same l o a n p r o p o s a l a f t e r  11)  (PLEASE ANSWER QUESTION  11)  d i f f e r e n c e s between o f f e r s were not  | | yes, the o f f e r s were c l e a r l y  13.  compared t o  Where i t was p o s s i b l e t o c o n s i d e r l o a n o f f e r s from two bank o r g a n i z a t i o n s f o r the same l e n d i n g s i t u a t i o n , were t h e r e s i g n i f i c a n t d i f f e r e n c e s i n t h e i r o f f e r s , c o n s i d e r i n g such a s p e c t s as term, maximum p r i n c i p a l , r e q u i r e a s e c u r i t y , i n t e r e s t charges, or o t h e r f a c t o r s ? | | no,  12'.  bank and  has  (please s p e c i f y ) :  Has your f i r m , t o your knowledge, ever approached a second bank w i t h r e c e i v i n g an u n s a t i s f a c t o r y l o a n o f f e r from the f i r m ' s u s u a l bank? •  worthwhile  the branch manager to d e a l w i t h ,  routes  significant  different  Are you one of the persons who are q u a l i f i e d t o r e p r e s e n t l o a n s from banks or o t h e r f i n a n c i a l i n s t i t u t i o n s ? Q  no  •  yes  (PLEASE PROCEED TO QUESTION 1 5 ,  no  •  yes  business  OMITTING INTERVENING QUESTIONS)  (PLEASE ANSWER QUESTION 13 )  Have you r e p r e s e n t e d the f i r m i n b u s i n e s s the same banking o r g a n i z a t i o n ? •  your f i r m i n n e g o t i a t i o n s f o r  (PLEASE OKIT QUESTION  loan negotiations with  a i f f e r e n t branch managers o f  14)  (PLEASE ANSWER QUESTION  14)  In your o p i n i o n , were t h e r e n o t i c a b l e d i f f e r e n c e s i n the way t h e s e managers viewed l e n d i n g s i t u a t i o n s , such t h a t one man would grant the l o a n under a c e r t a i n set o f c o n d i t i o n s t h a t would not have been a c c e p t a b l e to another manager? | | yes,  such d i f f e r e n c e s were n o t i c e d  I  | no,  I  I no o p i n i o n , managers  I  | no o p i n i o n , comparable l o a n p r o p o s a l s were made t o a i f f e r e n t managers, but not at times when the e x t e r n a l monetary c o n d i t i o n s (which a f f e c t t i g h t n e s s of c r e d i t ) were s i m i l a r  any  d i f f e r e n c e s between managers' l e n d i n g c r i t e r i a were not t h a t can not  pronounced  r e c a l l s i m i l a r l o a n s i t u a t i o n s t h a t were put forward t o  different  133  Section  3:  REGIONAL  15.  S p e c i f y the r e g i o n a l c e n t e r which i s c l o s e s t t o the f i r m ' s I  AREA  AND  REMOTENESS  I Cranbrook  Q  Grande P r a i r i e  headquarters:  Q  Kelowna  Q  Vancouver  Q  P r i n c e George  Q  Victoria  16 . What i s the highway mileage from company h e a d q u a r t e r s to the s e l e c t e d r e g i o n a l I NOTE:  S e c t i o n 4;  j miles  (please round o f f t o the n e a r e s t  center?  10 m i l e s , f o r s e c u r i t y - o f - i d e n t i t y  purposes)  Because o f the p o s s i b i l i t y t h a t a too s m a l l number o f f i r m s may f a l l i n t o each d i s t a n c e c l a s s i f i c a t i o n , d e t a i l e d d a t a from the above q u e s t i o n (16) may not be p u b l i s h e d . However, the i n f o r m a t i o n i s q u i t e e s s e n t i a l f o r a s p a t i a l a n a l y s i s of the r e t u r n s , and a g e n e r a l d e s c r i p t i o n i n the summary w i l l p o i n t out any d i f f e r e n c e s i n f i n a n c i n g p a t t e r n s between the d i f f e r e n t regions. ATTENTION GIVEN TO FINANCIAL INSTITUTIONS  17 . The respondent i s requested t o i n d i c a t e h i s g e n e r a l knowledge o f the f o l l o w i n g i n s t i t u t i o n s which grant medium-term l o a n s . While the q u e s t i o n i s not meant t o r e q u i r e any r e s e a r c h , the respondent i s urged t o i n c l u d e knowledge t h a t he has h i m s e l f or knows t o be possessed by h i s e x e c u t i v e c o l l e a g u e s i n the f i r m . Institution  Degree of Knowledge Are aware o f the l o c a t i o n o f an o f f i c e or a r e p r e s e n t a t i v e , from advertisements, e t c . Yes  any  Commercial Finance  Company  Roynat L t d . I n d u s t r i a l Development Bank any  Section 5 : 18.  19.  Chartered  PLANNING FOR  Bank  • • • •  Have read t h e i r l i t a t u r e , pamphlets regarding general f a c t s on l o a n p o l i c y and c o n d i t i o n s .  No  Yes  No  • • • •  • • • •  •  • • •  Have d i s c u s s e d the t o p i c of term l o a n s w i t h an o f f i c e r of the i n s t i t u t i o n and know what t o expect. Yes  • • • •  No  • • • •  COMPANY EXPANSION  Did the f i r m formulate any plans f o r expansion o f f i x e d a s s e t s d u r i n g the past two y e a r s ? (For the purposes o f t h i s q u e s t i o n n a i r e , c o n s i d e r expansion o f f i x e d a s s e t s t o i n c l u d e : major a d d i t i o n s of new f i x e d a s s e t s t o e x i s t i n g p l a n t and equipment; and replacement purchases f o r o b s o l e s c e n t or f u l l y d e p r e c i a t e d a s s e t s , i f the replacement has a s i g n i f i c a n t l y h i g h e r c a p a c i t y . ) •  no  •  yes  (PLEASE PROCEED TO QUESTION 28, (PLEASE CONTINUE, WITH QUESTION  OMITTING INTERVENING QUESTIONS) 19)  To what l e v e l were the expansion p l a n s of the p r e v i o u s two Q  years a c t u a l l y c a r r i e d ?  some p l a n s were dropped b e f o r e r e a c h i n g the stage of s e e k i n g f i n a n c i n g , because o f : ( s p e c i f y reasons w i t h r e s p e c t t o each major set o f p l a n s dropped) P l a n number 1 2 3 [ ] [ ] [ ] doubts o f the f e a s i b i l i t y o f the p r o j e c t Q Q  Q  CU  doubts t h a t f i n a n c e would be a v a i l a b l e  LZ]  other f a c t o r s  (please i n d i c a t e below)  Plan # 1 : P l a n # 2: P l a n f 3: I j at l e a s t one p l a n was p o s s i b l e i n t e r n a l and  taken t o the stage of a c t i v e c o n s i d e r a t i o n and e x t e r n a l sources of f i n a n c i n g  p o l l i n g o f some o f the  134  NOTE:  I f no p l a n s reached t h e l e v e l o f p l a n n i n g f i n a n c e s (Question 1 9 , l a s t p a r t ) , PLEASE PROCEED TO QUESTION 28, OMITTING INTERVENING QUESTIONS. Otherwise, begin the q u e s t i o n s below, and choose answers t h a t apply t o t h e l a t e s t s e t o f p l a n s f o r which f i n a n c i n g was planned. The format o f the next s e t o f q u e s t i o n s has been designed t o cope w i t h the v a r i e t y o f f i n a n c i n g e x p e r i e n c e s o f a l l respondents, but only w i t h r e s p e c t t o a s i n g l e s e t o f expansion p l a n s f o r each respondent. I n o r a e r t o prevent c o n f u s i o n , t h e respondent i s requested t o be s t r i c t l y c o n s c i e n t i o u s i n r e s t r i c t i n g h i s answers t o those which a p p l y o n l y t o the l a t e s t s e t of p l a n s f o r which t h e d e t a i l s o f f i n a n c i n g were a t l e a s t attempted t o be arranged.  S e c t i o n 6:  GENERAL FINANCING SOURCE  20. What g e n e r a l source o f f i n a n c i n g had been o r i g i n a l l y •  1—1 QUESTION £?;S?S?il! ^? tlx)  s w s  t  21.  0  b  e  a  t  l  e  a  s  t  i  n  P  a r t  s u p p l i e d from e x t e r n a l sources  (PLEASE CONTINUE, WITH  D i d the f i r m ever approach a f i n a n c i a l i n s t i t u t i o n f o r a l o a n i n o r d e r t o c a r r y out t h e plan? Q  no  ( p l e a s e s p e c i f y the g e n e r a l nature o f t h e a l t e r n a t i v e ) : (now,  yes S e c t i o n 7:  planned?  w h o l l y i n t e r n a l f i n a n c i n g , through r e s e r v e s o f company e a r n i n g s , borrowing from parent ££mK!?£!,™ J ^ r t h e r P e r s o n a l investment by the p r i n c i p a l s o f t h e company (PLEASE PROCEED TO QUESTION 28, OMITTING INTERVENING QUESTIONS)  PLEASE PROCEED TO QUESTION 28, OMITTING ALL INTERVENING QUESTIONS)  (PLEASE CONTINUE, WITH QUESTION 22)  DIRECT CONTACT WITH FINANCIAL INSTITUTIONS  22. Please i n d i c a t e a l l f i n a n c i a l i n s t i t u t i o n s which were approached f o r a l o a n r e g a r d i n g t h e l a s t set o f p l a n s f o r which e x t e r n a l f i n a n c i n g was sought. (The survey has i n t e r e s t i n any i n s t i t u t i o n which was c o n t a c t e d , whether o r not the l o a n p r o p o s a l was f u l l y e x p l a i n e d t o the l o a n o f f i c e r s , and r e g a r d l e s s o f whether or not a l o a n was l a t e r taken out from them.) any Canadian Chartered Bank  Industrial Development Bank  • 23 . In each  Roynat L t d .  • case  any Canadian Chartered Bank  •  any Commercial Other sources Finance of term l o a n s Company  •  •  (were approached)  what was the outcome o f the approach t o t h e i n s t i t u t i o n ? Industrial Roynat L t d . any Commercial Other sources Development Finance of term l o a n s Bank Company  •  •  •  •  •  A satisfactory loan resulted & the p l a n proceeded without modifications. (PLEASE PROCEED TO QUESTION 28 NOW)  •  •  •  •  •  The i n s t i t u t i o n d i d not want t o make t h e l o a n . (PLEASE PROCEED TO QUESTION 27 NOW)  •  •  •  •  •  The l o a n o f f e r o f the i n s t i t u t i o n was somewhat u n s a t i s factory. (PLEASE CONTINUE, WITH QUESTION" 24)  24. As i n d i c a t e d by t h e p r e c e d i n g q u e s t i o n , an approach t o an i n s t i t u t i o n r e s u l t e d i n a l o a n o f f e r t h a t was u n s a t i s f a c t o r y t o your f i r m . The reasons f o r t h e d i s s a t i s f a c t i o n were: I I h i g h c o s t o f the l o a n I  I some s a c r i f i c e o f managerial  I  I the f u l l amount r e q u e s t e d would not be f o r t h c o m i n g  I  I l o a n c o l l a t e r a l o r s e c u r i t y r e q u i r e d was somewhat e x c e s s i v e  I  I o t h e r reasons  c o n t r o l would have been i n v o l v e d  (please s p e c i f y ) :  135  25-  Did your f i r m accept • .  no  the  l o a n o f f e r , a l t h o u g h i t was  (PLEASE PROCEED TO QUESTION  yes  (PLEASE CONTINUE, WITH QUESTION  26. What changes i n the p l a n occurred, arrangements? | o r i g i n a l expenditure  completely  satisfactory?  26)  t h a t were s o l e l y due  | [ no m o d i f i c a t i o n s t o the o r i g i n a l |  not  27)  t o the u n s a t i s f a c t o r y f i n a n c i n g  c a p i t a l - a l l o c a t i o n p l a n n i n g were n e c e s s a r y  p l a n s were s c a l e d down  | | o r i g i n a l s c a l e o f plans was kept, but economies were e f f e c t e d on the e x p e n d i t u r e s , by s u b s t i t u t i o n o f cheaper u n i t s , e t c  actual  | | the o f f e r e d amount was taken, and the p l a n s were c a r r i e d out by combining the amount w i t h some e x t e r n a l a l t e r n a t i v e t o f i n a n c i n g d i r e c t l y through a f i n a n c i a l i n s t i t u t i o n , ( f o r example, by l e a s i n g p a r t o f the needed equipment) | | o r i g i n a l s c a l e o f p l a n s was m a i n t a i n e d by t a k i n g the o f f e r e d amount and on the o t h e r i n t e r n a l c a p i t a l a l l o t m e n t s o f the f i r m / S  o f subsequent b u s i n e s s firm?  NOTE:  ALL  |  | i n c r e a s e d the  |  | no  |  | a l l e v i a t e d the  i  n  c  e  t h ( j n >  w  h  a  t  h  a  a p p l y i n g a squeeze v  e  b  e  e  n  t  h  e  e  f  f  e  c  t  c o n d i t i o n s on the s t a t e of f l e x i b i l i t y o f the i n t e r n a l c a p i t a l of  s  the  squeeze  change capital  squeeze  RESPONDENTS ANSWERING QUESTION  26 SHOULD OMIT QUESTION  27  27. Given the d i f f i c u l t y i n o b t a i n i n g e x t e r n a l f i n a n c i n g , what course o f a c t i o n d i d the f i r m take r e g a r d i n g the plans which were being considered? (choose one option) | | the f i r m approached another f i n a n c i a l | | postponed the p l a n f o r the time  i n s t i t u t i o n s u c c e s s f u l l y (as expressed i n Q u e s t i o n  | | a l t e r e d the approach t o f i n a n c i n g , and went ahead with e x t e r n a l borrowing from a f i n a n c i a l i n s t i t u t i o n  S e c t i o n 8:  ALTERNATIVE MEANS OF  23)  being the expansion plans without  any  EXPANSION  28 . In t h i s f i n a l q u e s t i o n , a l l respondents are r e q u e s t e d to c h e c k - o f f each o f the f o l l o w i n g f e a t u r e s t h a t have been or are now c h a r a c t e r i s t i c o f h i s f i r m . The i n f o r m a t i o n i s n e c e s s a r y f o r an assessment o f the prevalence o f a l t e r n a t i v e s t o the e x t e r n a l f i n a n c i n g of expenditure plans d i r e c t l y through a f i n a n c i a l i n s t i t u t i o n . j [ the f i r m has s o l d shares o r bonds t o the g e n e r a l investment f i r m s or o t h e r s  p u b l i c , investment  underwriters,  | | your f i r m has c o n t r a c t e d to o t h e r f i r m s or i n d i v i d u a l s , a p o r t i o n , or a l l o f the work of s u p p l y i n g raw m a t e r i a l s f o r p r o d u c t i o n , where: | | ownership of most or a l l o f the raw m a t e r i a l s i s a l r e a d y vested p r e v i o u s t o the h a n d l i n g o f t h e s e m a t e r i a l s by c o n t r a c t o r s  i n your f i r m ,  | | ownership of most or a l l of the raw m a t e r i a l s by your f i r m o n l y a r i s e s a f t e r the m a t e r i a l s have been handled by c o n t r a c t o r s | | some p r o c e s s i n g o f the m a t e r i a l s by a c o n t r a c t o r i s r e q u i r e d \ | t r a n s p o r t a t i o n of t h e m a t e r i a l s by a c o n t r a c t o r i s r e q u i r e d | | c a p i t a l goods r e q u i r e d f o r p r o d u c t i o n , such as b u i l d i n g s , machinery or equipment; have been f i n a n c e d for'medium-term p e r i o d s through the vendor of the c a p i t a l goods, r a t h e r than by a f i n a n c i a l i n s t i t u t i o n , and t h i s arrangement o c c u r s : | | only r a r e l y |  ( r e l a t i v e to the o t h e r methods of f i n a n c i n g p r e f e r r e d by the  | f a i r l y often ( f c r examole, where the f o r each major purchase)  firm)  f i r m c o n s i d e r s t h i s avenue o f f i n a n c i n g  J [ c a p i t a l goods r e q u i r e d f o r p r o d u c t i o n , such as b u i l d i n g s , machinery or equipment sometimes l e a s e d or r e n t e d f o r medium or long-term p e r i o d s : j | only r a r e l y | |  END  I fairly  often  (compared to p u r c h a s i n g  the r e q u i r e d goods)  (as when the company has  a p o l i c y of l e a s i n g equipment whenever p o s s i b l e )  j the f i r m has i n the past merged with another f i r m t h a t p r e v i o u s l y operated i n the same g e n e r a l i n d u s t r y  OF QUESTIONNAIRE  are  separately  

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