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Forecasting distress in European SME portfolios

Sara Ferreira Filipe, Theoharry Grammatikos and Dimitra Michala

Journal of Banking & Finance, 2016, vol. 64, issue C, 112-135

Abstract: In this paper, we examine idiosyncratic and systematic distress predictors for small and medium sized enterprises (SMEs) in Europe over the period 2000–2009. We find that SMEs across European regions are vulnerable to common idiosyncratic factors but systematic factors vary. Moreover, systematic factors move average distress rates and small SMEs are more vulnerable to these factors compared to large SMEs. By including many very small companies in the sample, our models offer unique insights into the European small business sector. By exploring distress in a multi-country setting, the models uncover regional vulnerabilities. Finally, by incorporating systematic dependencies, the models capture distress co-movements.

Keywords: Credit risk; Distress; Forecasting; SMEs; Logit (search for similar items in EconPapers)
JEL-codes: C13 C41 C53 G33 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:64:y:2016:i:c:p:112-135

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