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Default Rates in the Loan Market for SMEs: Evidence from Slovakia

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Author Info
Jarko Fidrmuc ()
Christa Hainz ()
Anton Malesich ()

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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 shortterm 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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Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number wp854.

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Date of creation: 01 Nov 2006
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Handle: RePEc:wdi:papers:2006-854

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

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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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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    Other versions:
  15. Fernández-Val, Iván, 2009. "Fixed effects estimation of structural parameters and marginal effects in panel probit models," Journal of Econometrics, Elsevier, vol. 150(1), pages 71-85, May. [Downloadable!] (restricted)
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  18. Sanjiv Das & Darrell Duffie & Nikunj Kapadia & Leandro Saita, 2006. "Common Failings: How Corporate Defaults are Correlated," NBER Working Papers 11961, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fidrmuc , Jarko & Horváth, Roman & Horváthová, Eva, 2008. "Corporate Interest Rates and the Financial Accelerator in the Czech Republic," Discussion Papers in Economics 7191, University of Munich, Department of Economics. [Downloadable!]
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