A synthetic indicator of financial pressure for spanish firms

Andrew Benito (), Francisco Javier Delgado () and Jorge Martínez Pagés ()
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Andrew Benito: Bank of England
Francisco Javier Delgado: Banco de España
Jorge Martínez Pagés: Banco de España

No 411, Working Papers from Banco de España

Abstract: In this paper, we construct a firm-level estimate of the probability of default for a large sample of Spanish firms that can be interpreted as a composite measure of individual corporate financial pressure. By combining firms' accounting data from the Central Balance Sheet Data Office of the Banco de España with credit data from the Spanish Central Credit Register, we obtain a large data set (80,701 observations) covering a significantly longer time period (1985-2001) than is usual in the literature. Our results point to the importance of income leverage (together with other relatively standard financial ratios) for the financial pressure on firms, but also to the relevance of non-linearities and the inability of purely firm-level variables to capture completely the temporal behaviour of aggregate firm default rates. Thus, the real GDP growth rate and an average interest cost of debt are significant additional predictors of a firm's probability of default.

Pages: 29 pages
Date: 2004-06
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0411

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