Determinants of SME Credit Worthiness Under Basel Rules: The Value of Credit History Information

PSL Quarterly Review, Vol. 66, No. 264, pp. 21-47, 2013

27 Pages Posted: 28 Apr 2013 Last revised: 30 Apr 2013

See all articles by Francesco Dainelli

Francesco Dainelli

University of Florence - Department of Business Administration

Francesco Giunta

University of Florence - Dipartimento di Scienze Aziendali

Fabrizio Cipollini

Universita di Firenze, DiSIA (Dipartimento di Statistica, Informatica, Applicazioni)

Date Written: April 27, 2013

Abstract

The Basel III Accord has reportedly had an impact on SME financing. In this paper, we aim to highlight the determinants of SME credit worthiness. We use credit history in addition to financial ratios and “hybrid” indicators that have been built by mixing credit history with financial statement data. We develop a failure prediction logit model on 187 Italian SMEs. The use of short-term credit lines is the most important variable. Contrary to common understanding, capitalization levels do not affect ratings. Lastly, credit worthiness is sensitive to sale profitability.

Keywords: Basel accord, Small business financing, credit historical data, rating

JEL Classification: M21, E51, G24

Suggested Citation

Dainelli, Francesco and Giunta, Francesco and Cipollini, Fabrizio, Determinants of SME Credit Worthiness Under Basel Rules: The Value of Credit History Information (April 27, 2013). PSL Quarterly Review, Vol. 66, No. 264, pp. 21-47, 2013, Available at SSRN: https://ssrn.com/abstract=2257305

Francesco Dainelli (Contact Author)

University of Florence - Department of Business Administration ( email )

via delle Pandette, 9
Florence, Florence 50127
Italy

Francesco Giunta

University of Florence - Dipartimento di Scienze Aziendali ( email )

Piazza di San Marco, 4
Florence, 50121
Italy

Fabrizio Cipollini

Universita di Firenze, DiSIA (Dipartimento di Statistica, Informatica, Applicazioni) ( email )

Viale Morgagni, 59
Florence, Florence 50134
Italy
+39 055 2751592 (Phone)
+39 055 4223560 (Fax)

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