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

31 Pages Posted: 11 Dec 2006 Last revised: 10 Jun 2009

See all articles by Christa Hainz

Christa Hainz

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

Jarko Fidrmuc

Zeppelin University Friedrichshafen

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Date Written: June 1, 2009

Abstract

The current crisis raises the question whether loans to SMEs in emerging markets are inherently more risky. We use 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. Finally, liability as proxied by the legal form of SMEs has important incentive effects. In sum, 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

Hainz, Christa and Fidrmuc, Jarko, Default Rates in the Loan Market for SMEs: Evidence from Slovakia (June 1, 2009). William Davidson Institute Working Paper No. 854, Available at SSRN: https://ssrn.com/abstract=950528 or http://dx.doi.org/10.2139/ssrn.950528

Christa Hainz (Contact Author)

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

Poschinger Str. 5
Munich, 81069
Germany

Jarko Fidrmuc

Zeppelin University Friedrichshafen ( email )

Am Seemooser Horn 20
Friedrichshafen, 88045
Germany

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