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Default Rates in the Loan Market for SMEs

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Author Info
Fidrmuc, Jarko
Hainz, Christa
Malesich, Anton

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Abstract

Banks entering an emerging market face a lot of uncertainty about the risks involved in lending. We use a unique unbalanced panel of nearly 700 short-term loans made to SMEs in Slovakia between January 2000 and June 2005. Of the loans granted, on average 6.0 per cent of the firms defaulted. Several probit models and panel probit models show that liquidity and profitability factors are important determinants of SMEs defaults, while debt factors are less robust. However, we find that above average indebtedness significantly increases the probability of default. Moreover, the legal form that determines liability has important incentive effects.

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File URL: http://epub.ub.uni-muenchen.de/1356/1/creditsk_mdp0701.pdf
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Publisher Info
Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 1356.

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Date of creation: Jan 2007
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Handle: RePEc:lmu:muenec:1356

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Related research
Keywords: SME; Credit; Loan Default; Mortality Rates; Incentives; Probit; Panel Data;

Find related papers by JEL classification:
G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models

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This page was last updated on 2009-11-26.


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