Forecasting Distress in European SME Portfolios
Posted: 18 May 2013 Last revised: 12 Jan 2016
Date Written: March 2016
In this paper, we examine idiosyncratic and systematic distress predictors for small and medium sized enterprises (SMEs) in Europe over the period 2000-2009. We find that SMEs across European regions are vulnerable to common idiosyncratic factors but systematic factors vary. Moreover, systematic factors move average distress rates and small SMEs are more vulnerable to these factors compared to large SMEs. By including many very small companies in the sample, our models offer unique insights into the European small business sector. By exploring distress in a multi-country setting, the models uncover regional vulnerabilities. Finally, by incorporating systematic dependencies, the models capture distress co-movements.
Keywords: credit risk; distress; forecasting; SMEs; logit
JEL Classification: C13, C41, C53, G33
Suggested Citation: Suggested Citation