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

Posted: 30 Jul 2011

See all articles by Jarko Fidrmuc

Jarko Fidrmuc

Zeppelin University Friedrichshafen

Christa Hainz

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Multiple version iconThere are 2 versions of this paper

Date Written: 2010

Abstract

Financial markets in emerging economies are often perceived as more risky than those in developed countries. We investigate whether this is true for loans to SMEs using a unique unbalanced panel of nearly 700 loans made to SMEs in Slovakia between 2000 and 2005. Several probit and panel probit models show that liquidity and profitability factors are important determinants of SME defaults. Moreover, we find that indebtedness significantly increases the probability of default. Liability as proxied by the legal form of SMEs has important incentive effects. Finally, there exist significant differences between sectors. We show that default rates and factors converged to values found in developed financial markets.

Keywords: SMEs, Banking, Loan default, Incentives, Asymmetric information, Probit, Financial crisis

JEL Classification: G33, G21, C25

Suggested Citation

Fidrmuc, Jarko and Hainz, Christa, Default Rates in the Loan Market for SMEs: Evidence from Slovakia (2010). Economic Systems, Vol. 34, No. 2, 2010, Available at SSRN: https://ssrn.com/abstract=1898669

Jarko Fidrmuc (Contact Author)

Zeppelin University Friedrichshafen ( email )

Am Seemooser Horn 20
Friedrichshafen, 88045
Germany

Christa Hainz

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 81069
Germany

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