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

  • Jarko Fidrmuc

    ()

  • Christa Hainz

    ()

  • Anton Malesich

    ()

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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File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/57234/1/wp854.pdf
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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp854.

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