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The Determinants of Credit Default on Portuguese Start-Up Firms: .An Econometric model

  • Vitor Gonçalves

    ()

    (Phd Student of Finance, FEP.UP)

  • Francisco Vitorino Martins

    ()

    (Professor FEP.UP)

  • Elísio Brandão

    ()

    (Professor of Finance, FEP.UP)

Registered author(s):

    In this paper we investigate the behaviour of credit default in start-up companies. Using a logit regression technique on a panel data of 1430 start-ups and considering a tracking period of three years, we tested the impact on the probability of occurrence of the first credit event in financing agreements due to variables grouped into three categories: financial capital, human capital and industry dynamics. We concluded from a financial point of view, that the support provided by partners in the financing of the company’s activity, the intensity of use of assets under management and reduced debt pay-back periods, were decisive in mitigating risk of default. In addition we found that the occurrence of a credit event will only be as limited as higher the quality of human capital held by the promoter of the project in terms of educational background and management experience.

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    File URL: http://www.fep.up.pt/investigacao/workingpapers/wp534.pdf
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    Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 534.

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    Length: 29 pages
    Date of creation: Apr 2014
    Date of revision:
    Handle: RePEc:por:fepwps:534
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    1. Hakenes, Hendrik, 2004. "Banks as delegated risk managers," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2399-2426, October.
    2. Godbillon-Camus, Brigitte & Godlewski, Christophe, 2005. "Credit risk management in banks: Hard information, soft Information and manipulation," MPRA Paper 1873, University Library of Munich, Germany.
    3. Edward I. Altman & Gabriele Sabato, 2007. "Modelling Credit Risk for SMEs: Evidence from the U.S. Market," Abacus, Accounting Foundation, University of Sydney, vol. 43(3), pages 332-357.
    4. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, 09.
    5. Edward Altman & Gabriele Sabato, 2005. "Effects of the New Basel Capital Accord on Bank Capital Requirements for SMEs," Journal of Financial Services Research, Springer, vol. 28(1), pages 15-42, October.
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