Purpose -The purpose of this paper is to develop a credit-scoring model as an aggregate valuation procedure that integrates various financial and non-financial factors and thereby improves small to medium-sized enterprises' (SMEs) knowledge about their default risk. Design/methodology/approach -Using panel data from a representative sample of Portuguese SMEs operating in the food or beverage manufacturing sector, this paper develops a logit scoring model to estimate one-year predictions of default. Findings -The probability of non-default in the next year is an increasing function of profitability, liquidity, coverage, and activity and a decreasing function of leverage. Smaller firms and those with just one bank relationship have a higher probability of default. The findings suggest that a main bank has incentives to engage in hold up by increasing margins that ex post are too high. Practical implications -Because SMEs differ from large corporations in their credit risk (e.g., riskier, lower asset correlations), this study has implications for both banks and supervisory actors. Banks should consider qualitative variables when setting internal systems and procedures to manage credit risk. Supervisory institutions should claim mixed credit ratings to determine regulatory capital requirements. Originality/value -This paper offers a new model, focused specifically on SMEs, and explores the role of financial and non-financial factors in determining internal credit risks.
Financial inclusion is a vital development policy concern; different combinations and conditions of access to (supply) and use of (demand) financial services may predict levels of financial inclusion. With a fuzzy set qualitative comparative analysis, conducted across 61 countries worldwide, the current research establishes that financial literacy and human development are conditions of high financial inclusion; supply-side drivers, such as bank concentration and bank branches, represent substitutive conditions for attaining high levels of financial inclusion. With separate analyses of a split sample, designating developed and developing countries, the authors also determine that the absence of financial literacy and human development, as demand-side drivers, leads to diminished financial inclusion for both sets of countries. In turn, this research offers novel ideas for achieving more efficient policies to prompt financial inclusion.
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