Defaults in bank loans to SMEs during the financial crisis

• Type: Article in International Scientific Journal
• Date: 2018

Authors

Duarte, FD (Author) Other; Matias Gama, APM (Author) Other; Gulamhussen, MA (Author) Other

Journal

Title: Small Business Economics

Vol. 51

Pages: 591-608

ISSN: 0921-898X

Publisher: Springer Nature

Indexing

ISI Web of Knowledge - 32 Citations

Scopus - 39 Citations

Other information

Authenticus ID: P-00N-3D4

DOI: 10.1007/s11187-017-9944-9

Abstract (EN): 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.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 18