Moral hazard index for credit risk to SMEs

José A. Castillo, Andrés Mora-Valencia and Javier Perote

International Economics, 2022, vol. 172, issue C, 311-323

Abstract: This article proposes a methodology to calculate the effect of moral hazard on short term credit (working capital) to small and medium-sized enterprises (SMEs). The methodology incorporates four categories of moral hazard ratio defined in a previous study, which are employed to determine probability of default based on a logit model. To this end, a novel Colombian database is used to calculate a moral hazard index that considers the percentages of the odds ratios of the moral hazard variables for positive coefficients on the probabilities of default. The empirical analysis result in an index measuring the impact of moral hazard on odds ratio mainly based on underinvestment moral hazard category in the sample of analyzed companies for the period ranged from 2007 to 2014.

Keywords: SME credit; Credit risk; Moral hazard; Moral hazard index (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inteco:v:172:y:2022:i:c:p:311-323

DOI: 10.1016/j.inteco.2021.10.003

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