Forecasting Distress in European SME Portfolios

Posted: 18 May 2013 Last revised: 12 Jan 2016

See all articles by Sara Ferreira Filipe

Sara Ferreira Filipe

Luxembourg School of Finance

Theoharry Grammatikos

Luxembourg School of Finance

Dimitra Michala

Luxembourg School of Finance

Date Written: March 2016

Abstract

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

Ferreira Filipe, Sara and Grammatikos, Theoharry and Michala, Dimitra, Forecasting Distress in European SME Portfolios (March 2016). Journal of Banking and Finance, Vol. 64, No. 1, 2016. Available at SSRN: https://ssrn.com/abstract=2266426 or http://dx.doi.org/10.2139/ssrn.2266426

Sara Ferreira Filipe

Luxembourg School of Finance ( email )

4 Rue Albert Borschette
Luxembourg, L-1246
Luxembourg
(+352) 46 66 44 5838 (Phone)
(+352) 46 66 44 6835 (Fax)

HOME PAGE: http://www.lsf.lu/

Theoharry Grammatikos

Luxembourg School of Finance ( email )

4 Rue Albert Borschette
Luxembourg, L-1246
Luxembourg

Dimitra Michala (Contact Author)

Luxembourg School of Finance ( email )

2b, Rue Albert Borschette
Luxembourg, L-1246
Luxembourg
+352 4666446805 (Phone)

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