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

Author

Listed:
  • Vitor Gonçalves

    (Phd Student of Finance, FEP.UP)

  • Francisco Vitorino Martins

    (Professor FEP.UP)

  • Elísio Brandão

    (Professor of Finance, FEP.UP)

Abstract

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.

Suggested Citation

  • Vitor Gonçalves & Francisco Vitorino Martins & Elísio Brandão, 2014. "The Determinants of Credit Default on Portuguese Start-Up Firms: .An Econometric model," FEP Working Papers 534, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:534
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/wp534.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Credit Default; Start-Up; Financial Capital; Human Capital; Industry Dynamics;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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