Determinants of Small Business Default

Posted: 11 Jul 2005

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC)

Chunlin Liu

University of Nevada, Reno - College of Business

Abstract

In this paper, we empirically assess the importance of various credit risk characteristics in determining default behavior of more than 31,000 small business loans and lines both under $100K and between $100K-$250K. Overall, our results indicate that the main drivers of small business default include: checking account balances, collateral indicators, credit risk scores, and firm age. However, once we differentiate between spot loans and lines of credit and between loan sizes, small business default behavior differs significantly.

Keywords: Spot loans, line of credit, scored lending, loan size, small business defaults

JEL Classification: G21, G31, L23

Suggested Citation

Agarwal, Sumit and Chomsisengphet, Souphala and Liu, Chunlin, Determinants of Small Business Default. Available at SSRN: https://ssrn.com/abstract=754844

Sumit Agarwal (Contact Author)

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Souphala Chomsisengphet

Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street, SW
Washington, DC 20219
United States
202-649-5533 (Phone)

Chunlin Liu

University of Nevada, Reno - College of Business ( email )

University of Nevada, Reno
Reno, NV 89557-0016
United States

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