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A synthetic indicator of financial pressure for spanish firms

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  • Andrew Benito

    ()
    (Bank of England)

  • Francisco Javier Delgado

    ()
    (Banco de España)

  • Jorge Martínez Pagés

    ()
    (Banco de España)

Abstract

In this paper, we construct a firm-level estimate of the probability of default for a large sample of Spanish firms that can be interpreted as a composite measure of individual corporate financial pressure. By combining firms' accounting data from the Central Balance Sheet Data Office of the Banco de España with credit data from the Spanish Central Credit Register, we obtain a large data set (80,701 observations) covering a significantly longer time period (1985-2001) than is usual in the literature. Our results point to the importance of income leverage (together with other relatively standard financial ratios) for the financial pressure on firms, but also to the relevance of non-linearities and the inability of purely firm-level variables to capture completely the temporal behaviour of aggregate firm default rates. Thus, the real GDP growth rate and an average interest cost of debt are significant additional predictors of a firm's probability of default.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/04/Fic/dt0411e.pdf
File Function: First version, June 2004
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0411.

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Length: 29 pages
Date of creation: Jun 2004
Date of revision:
Handle: RePEc:bde:wpaper:0411

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Cited by:
  1. Petr Jakubík, 2006. "Does Credit Risk Vary with Economic Cycles? The Case of Finland," Working Papers IES 2006/11, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006.
  2. Bonfim, Diana, 2009. "Credit risk drivers: Evaluating the contribution of firm level information and of macroeconomic dynamics," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 281-299, February.
  3. Petr JAKUBÍK, 2007. "Macroeconomic Environment and Credit Risk (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 60-78, March.
  4. Javier Gutiérrez Rueda, . "Un análisis de riesgo de crédito de las empresas del sector real y sus determinantes," Temas de Estabilidad Financiera 046, Banco de la Republica de Colombia.
  5. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Banco de Espa�a Working Papers 0513, Banco de Espa�a.
  6. Suzan Hol, 2006. "The influence of the business cycle on bankruptcy probability," Discussion Papers 466, Research Department of Statistics Norway.
  7. Maria Clara Soares, 2006. "Modelling of an Indicator for Credit Scoring of Non-Financial Corporations – a Preliminary Research Based on Discriminant Analysis," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  8. Bruneau, C. & de Bandt, O. & El Amri, W., 2012. "Macroeconomic fluctuations and corporate financial fragility," Journal of Financial Stability, Elsevier, vol. 8(4), pages 219-235.

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