A default prediction model for Italian SMEs: the relevance of the capital structure

Modina, Michele; Pietrovito, Filomena

doi:10.1080/09603107.2014.927566

Cited by 25 publications

(14 citation statements)

References 31 publications

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“…The study further concluded that contrary to general perception, there is no empirical evidence to support that smaller-size banks extend more credit to SMEs. Modina and Pietrovito (2014) looked at the determinants of defaults for the Italian SMEs financing using a unique data provided by credit information bureau. The author's findings suggest the importance of capital structure of the smaller and mediumsize firm.…”

Section: Determinants Of Demand and Supply Of Smes Finance: Review Ofmentioning

confidence: 99%

SMEs Credit Conditions during the Financial Crisis in Europe

Ghulam¹

2019

Prague Economic Papers

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This study examines the role of firm-specific, macroeconomic, banking and financial environment factors in determining whether they were able to access external finance during the global financial crisis. Heckman's selection approach is used to model the demand and supply of credit in the euro area during and after the financial crisis period. We conclude that since 2011, when the rejection probabilities for external credit applications peaked, the chances of obtaining credit have improved. However, young and small firms are still more likely to have their credit applications rejected. A decrease in government support such as guarantees increases the probability of rejection, as does a reduction in firms' own capital and a worsening credit history. Among the bankspecific factors, an increase in banks' equity capitalization reduces the rejection probability, while an increase in the cost of borrowed funds and a decrease in the competition levels raise the rejection probability. The legal structure to deal with insolvency disputes and the development of the credit information market have a significant bearing on credit availability, as we find that an increase in the time to resolve insolvencies and a reduction in adverse selection problems by credit information sharing increase the credit rejection probabilities.

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Section: Determinants Of Demand and Supply Of Smes Finance: Review Ofmentioning

confidence: 99%

SMEs Credit Conditions during the Financial Crisis in Europe

Ghulam¹

2019

Prague Economic Papers

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“…They find that profit, growth and employee efficiency are prevalent in all default definitions and that growth in profitability, annual sales and operating revenue are always key variables to predict SME default. Apart from the study of Lin et al ( 2012 ) based on Russian companies, one of the common findings in these contributions is that, among accounting variables, leverage indicators seem to be better predictors of SME default than liquidity and profitability ratios (Modina and Pietrovito 2014 ). Also, the age and the size of the company are negatively related to the probability of default of SMEs (Abdullah et al 2019 ; Altman et al 2010 ).…”

Section: Results Of the Vos Analysis And The Systematic Literature Rementioning

confidence: 99%

Rethinking SME default prediction: a systematic literature review and future perspectives

et al. 2021

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Over the last dozen years, the topic of small and medium enterprise (SME) default prediction has developed into a relevant research domain that has grown for important reasons exponentially across multiple disciplines, including finance, management, accounting, and statistics. Motivated by the enormous toll on SMEs caused by the 2007–2009 global financial crisis as well as the recent COVID-19 crisis and the consequent need to develop new SME default predictors, this paper provides a systematic literature review, based on a statistical, bibliometric analysis, of over 100 peer-reviewed articles published on SME default prediction modelling over a 34-year period, 1986 to 2019. We identified, analysed and reviewed five streams of research and suggest a set of future research avenues to help scholars and practitioners address the new challenges and emerging issues in a changing economic environment. The research agenda proposes some new innovative approaches to capture and exploit new data sources using modern analytical techniques, like artificial intelligence, machine learning, and macro-data inputs, with the aim of providing enhanced predictive results.

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“…It has been shown that the management of working capital is particularly relevant for small firms (Arcelus and Srinivasan, 1993;Saccurato, 1994;Chittenden et al, 2000;Kieschnick et al, 2013), as these enterprises have limited access to the capital market in the medium term and then tend to finance fixed asset investments with debt maturing within twelve months and show rates of default higher than those of large firms (Grablowsky, 1976;Dunn and Cheatham, 1993;Peel and Wilson, 1996;Gray et al, 2006;Molina and Preeve, 2009). This is true even in recent years in Italy (Modina and Pietrovito, 2014;Gordini, 2014). This has particular relevance for the aquaculture sector, where most companies are classified as SMEs.…”

Section: Balance Sheet Analysis Approachmentioning

confidence: 94%

Profitability and Financial Sustainability Analysis in Italian Aquaculture Firms by Application of Economic and Financial Margins

Iotti¹,

Bonazzi²

2015

American Journal of Agricultural and Biological Sciences

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Agricultural Firms operating in the aquaculture sector in Italy are often characterized by high investment and high capital intensity. In fact, these companies need to develop structures and breeding systems to generate adequate cash flow to repay their investment in fixed assets. In addition, the biological cycle of breeding further extends the need for capital, in this case to finance working capital. There is therefore often a mismatch between the economic and financial cycles, wherein profit margins may differ from financial margins. In this way, such companies have an economic advantage but no sustainable financial cycle. In these cases, several crisis may force companies to default, especially when firns are unable to cover debt repayment. This difficulty is particularly present in Italy, where aquaculture firms are often Small and Medium Enterprises (SMEs) and therefore have greater difficulty than large companies accessing the capital market. Our research evaluates the cost effectiveness and financial sustainability of a sample of forty firms operating in the aquaculture sector in Italy, within a timespan of five years, through comparative analysis of the economic and financial margins. The analysis shows that such firms are capital intensive (TA/VP of median value is 1.16%). Financial debt emerges as the first source of capital then increasing companies' financial dependence through credit systems and borrowing costs. Firms have a particular absorption in the NWC cycle, with I_DAYS being 143.29 days, AR_DAYS being 72.75 and 145.51 AP_DAYS expressing financial operating cycle (I_DAYS + AR_DAYS -AP_DAYS) with a length of 70.53 days. Profit margins, even if they are correlated with financial margins, are lower on average. The research highlights that economic model worst explains FCFE (F = 0.011 and adjusted R 2 = 0.803), while the financial model best explains FCFE (F = 0.000 and adjusted R 2 = 0.922). Our research will be further developed through analyzing cooperatives, unincorporated partnerships and sole proprietorships. It may also be useful to undertake a comparative analysis of aquaculture firms operating in other countries of the Mediterranean basin.

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A default prediction model for Italian SMEs: the relevance of the capital structure

Cited by 25 publications

References 31 publications

SMEs Credit Conditions during the Financial Crisis in Europe

SMEs Credit Conditions during the Financial Crisis in Europe

Rethinking SME default prediction: a systematic literature review and future perspectives

Profitability and Financial Sustainability Analysis in Italian Aquaculture Firms by Application of Economic and Financial Margins

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