Determinants and Predictors of SMEs’ Financial Failure: A Logistic Regression Approach

Youssef Zizi, Mohamed Oudgou and Abdeslam El Moudden
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Youssef Zizi: Laboratory of Research in Organizational Management Sciences, ENCG Kenitra, Ibn Tofail University, Kenitra 14020, Morocco
Mohamed Oudgou: Laboratory for Studies and Research in Economic Sciences and Management, ENCG Béni Mellal—University Sultane Moulay Slimane, Béni Mellal 23000, Morocco
Abdeslam El Moudden: Laboratory of Research in Organizational Management Sciences, ENCG Kenitra, Ibn Tofail University, Kenitra 14020, Morocco

Risks, 2020, vol. 8, issue 4, 1-21

Abstract: This paper aims to identify the determinants and predictors of Small and Medium-sized Enterprises (SMEs)’ financial failure. Within this framework, we have opted for a quantitative method based on a sample of healthy and failing SMEs of a Moroccan bank. The main results of the different optimal models are obtained by the stepwise method of estimating logistic regression. These results show, in a normal economic context, that the variables that discriminate between healthy and failing SMEs are the main predictors of financial failure. Autonomy ratio, interest to sales, asset turnover, days in accounts receivable, and duration of trade payables are the variables that increase the probability of financial failure, while repayment capacity and return on assets reduce the probability of failure. These variables present an overall classification rate of healthy and failing SMEs of 91.11% three years before failure and of 84.44% two years and one year before failure.

Keywords: SMEs; determinants of financial failure; predictors of financial failure; logistic regression (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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