Defaults in bank loans to SMEs during the financial crisis
Duarte, Fabio Dias Gama, Ana Paula Matias Gulamhussen, Azzim
Duarte, Fabio Dias
Gama, Ana Paula Matias
Gulamhussen, Azzim
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2018
Journal
Small Business Economics
Book
Publication Volume
51
Publication Issue
3
Publication Begin page
591
Publication End page
608
Publication Number of pages
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Abstract
We investigate the role of (business) collateral and (personal) guarantees alongside small and medium enterprise (SME), lending bank and loan characteristics, macroeconomic conditions, sectors, and geographic locations while controlling for unobserved time effects in predicting default at the peak of the financial crisis. First, we find a positive relation between collateral and default, and a negative relation between guarantees and default. Second, we find a negative relation between the joint influence of collateral and high credit score, and a positive relation between the joint influence of collateral and low credit score and default. We also find a negative relation between the joint influence of guarantees and high credit score. These findings are relevant for SME policies aimed at facilitating access to credit, reducing the cost of borrowing, and decreasing default, risk management of banks, and the application of theories of financial economics in the context of a financial crisis.
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Keywords
Accounting & Finance, SME Management (Small & medium sized enterprises), Financial Services & Insurance, Corporate Finance Decisions, Financial Crisis, Government Policy and Regulation, Banks