Forecasting distress in European SME portfolios

Dimitra Michala, Theoharry Grammatikos and Sara Ferreira Filipe

No 2013/17, EIF Working Paper Series from European Investment Fund (EIF)

Abstract: We develop distress prediction models for non-financial small and medium sized enterprises (SMEs) using a dataset from eight European countries over the period 2000-2009. We examine idiosyncratic and systematic covariates and find that macro conditions and bankruptcy codes add predictive power to our models. Moreover, industry effects usually demonstrate significance but provide only small improvements. The paper contributes to the literature in several ways. First, using a sample with many micro companies, it offers unique insights into European small businesses. Second, it explores distress in a multi-country setting, allowing for regional and country comparisons. Third, the models can capture changes in overall distress rates and co-movements during economic cycles. The researchers invite for feedback and comments.

Keywords: credit risk; distress; forecasting; SMEs; discrete time hazard model; multi-period logit model; duration analysis (search for similar items in EconPapers)
JEL-codes: C13 C41 C53 G33 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Forecasting distress in European SME portfolios (2016)
Working Paper: Forecasting Distress in European SME Portfolios (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:eifwps:201317

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