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The Interdependences between Italian Firms’ Access to Finance and their Probability of Default

Author

Listed:
  • Claudiu Albulescu

    (Politehnica University of Timisoara, Romania)

  • Serban Miclea

    (Politehnica University of Timisoara, Romania)

Abstract

This paper addresses the interdependences between Italian firms’ access to finance and their probability of default, over the period 2005 to 2011. From a theoretical point of view, an increased default probability limits the firms’ access to bank loans. At the same time, a high indebtedness rate increases their risk of default. Therefore, in order to shed light on this nexus, we use a VAR specification and a large dataset including 143,000 Italian firms. We document a bidirectional causality between the bank loans to sales ratio and the Altman Z-score used as proxy for the probability of default. However, even if we find no clear evidence in the favour of the indebtedness effect or financing effect, we show that an increased probability of default does not limit the Italian firms’ access to bank loans, on the contrary.

Suggested Citation

  • Claudiu Albulescu & Serban Miclea, 2016. "The Interdependences between Italian Firms’ Access to Finance and their Probability of Default," Managing Innovation and Diversity in Knowledge Society Through Turbulent Time: Proceedings of the MakeLearn and TIIM Joint International Conference 2016,, ToKnowPress.
    • Handle: RePEc:tkp:mklp16:697-703
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