ECONOMETRIC MODEL USED IN DECISION-MAKING PROCESS OF COMPANY FINANCING

Florin Mihai Magda () and Adina Elena Danuletiu ()
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Florin Mihai Magda: Babes-Bolyai University
Adina Elena Danuletiu: 1 Decembrie 1918 University

Romanian Economic Business Review, 2015, vol. 10, issue 3, 57-82

Abstract: Over time, SMEs financing resulted in many debates starting with the general economic background up to the correct interpretation of financial statements on which the financing decision is based. In a more restricted way, the financing decision is finding, in the most appropriate and fair manner, the correlations between financial data, and it concerns all Romania-based financial institutions,mindful of the lessons taught by the financial crisis, the new Basel III. Thus, banks have created internal rating models, proving the viability of the loan applicant by calculating the PD. In this case study, we conducted an econometric modeling based on the logistic regression which, starting from a financial module consisting of 7 ratios, calculates the PD for a time horizon of 12 months, for a company applying for funding. The study highlights, both theoretically and practically, the advantages and the limits of econometric modeling. We used data from 25 Romanian-based companies, collected over a period of 4 years, from 2008 to 2011, resulting in a database consisting of 100 observations processed using the STATA statistical processing software. The results of the econometric model – the impact over the PD are interpreted and validated by calculating the odds ratio of PD.

Keywords: score function; logistic regression; credit; rating; probability of default (PD); SMEs financing (search for similar items in EconPapers)
Date: 2015
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