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Profiling the indebtedness of Irish SMEs

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  • McCann, Fergal

    (Central Bank of Ireland)

Abstract

While much is known of the magnitude and performance of SME debt in Ireland, up to this point no measure of SME indebtedness has been available for a representative sample of the population. Survey data on the ratio of Debt to Turnover (DT) for Irish SMEs in 2012 and 2013 are presented here, with the data revealing that one third of SMEs carry no debt, while 84 per cent of SMEs have a DT of less than one third. 7 per cent of SMEs have a DT of greater than one, with a small percentage of rms having debt levels that are orders of magnitude larger than turnover. An analysis of the impact of DT on nancial health indicates that, as DT gets larger, solvency and default risk deteriorate, even at low levels of DT. The impact tapers among rms with the very highest levels of DT - among these heavily indebted rms whose default risk is higher than rms at all other points in the DT distribution, an increased DT does not act to further increase default and solvency risk.

Suggested Citation

  • McCann, Fergal, 2014. "Profiling the indebtedness of Irish SMEs," Economic Letters 03/EL/14, Central Bank of Ireland.
    • Handle: RePEc:cbi:ecolet:03/el/14
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    References listed on IDEAS

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    1. Brahima Coulibaly & Jonathan Millar, 2011. "Investment Dynamics in the Aftermath of the Asian Financial Crisis: A Firm-Level Analysis," International Finance, Wiley Blackwell, vol. 14(2), pages 331-359, June.
    2. De Fiore, Fiorella & Raudsaar, Taavi & McCann, Fergal & Carluccio, Juan & Horny, Guillaume & Finaldi Russo, Paolo & Caruana Briffa, Elaine & Metzemakers, Paul & van der Veer, Koen & Herman, Uroš & Kar, 2013. "Corporate finance and economic activity in the euro area," Occasional Paper Series 151, European Central Bank.
    3. Task Force of the Monetary Policy Committee of the ESCB & Diego Rodriguez-Palenzuela & Matthieu Darracq-Pariès & Giacomo Carboni & Annalisa Ferrando & Petra Köhler Ulbrich & Marie-Denise Zachary & Fel, 2013. "Corporate finance and economic activity in the euro area," Occasional Paper Series 151, European Central Bank.
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    Cited by:

    1. McQuinn, John & McCann, Fergal, 2017. "The financial vernerability of Irish Small and Medium Enterprises, 2013 to 2017," Economic Letters 14/EL/17, Central Bank of Ireland.
    2. Fergal McCann & Tara McIndoe-Calder, 2015. "Irish SME Property Exposure: What Do We Know?," The Economic and Social Review, Economic and Social Studies, vol. 46(1), pages 119-132.
    3. International Monetary Fund, 2016. "Ireland: Financial Sector Assessment Program: Technical Note-Macroprudential Policy Framework," IMF Staff Country Reports 2016/316, International Monetary Fund.
    4. O'Brien, Eoin & Stuart, Rebecca, 2014. "Corporate Liquidations in Ireland," Economic Letters 06/EL/14, Central Bank of Ireland.
    5. Lawless, Martina & O’Connell, Brian & O’Toole, Conor, 2015. "SME recovery following a financial crisis: Does debt overhang matter?," Journal of Financial Stability, Elsevier, vol. 19(C), pages 45-59.
    6. McCann, Fergal & McIndoe-Calder, Tara, 2014. "Property debt overhang: the case of Irish SMEs," Research Technical Papers 14/RT/14, Central Bank of Ireland.
    7. International Monetary Fund, 2016. "Ireland: Financial Sector Assessment Program: Technical Note-Nonbank Sector Stability Analyses," IMF Staff Country Reports 2016/317, International Monetary Fund.
    8. Nir Klein, 2016. "Corporate Sector Vulnerabilities in Ireland," IMF Working Papers 2016/211, International Monetary Fund.

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