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Modelling credit risk with soft facts for micro firms and Smes

Author

Listed:
  • Giampaolo Gabbi

    (Università di Siena)

  • Massimo Matthias

    (Università di Siena)

  • Michele Giammarino

    (Banca MPS)

Abstract

We investigate how the use of quantitative along with qualitative variables may improve the evaluation of the creditworthiness of micro, small and medium firms. We harden qualitative variables in order to assign ratings to borrowers. The survey covered a sample of about 17 thousand Italian companies observed during the financial crisis. Soft facts are determined within the balanced scorecard framework in order to find out the explanatory power of customers, business processes, learning and growth, and financial perspectives. The purpose to use such a variables is to estimate the resilience of firms during a crisis period, from the bank’s perspective. Our findings show that credit risk models integrating soft variables optimize the bankruptcy prediction

Suggested Citation

  • Giampaolo Gabbi & Massimo Matthias & Michele Giammarino, 2019. "Modelling credit risk with soft facts for micro firms and Smes," BANCARIA, Bancaria Editrice, vol. 1, pages 32-47, January.
    • Handle: RePEc:ban:bancar:v:1:y:2019:m:january:p:32-47
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    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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