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Determinants and Predictors of SMEs’ Financial Failure: A Logistic Regression Approach

Author

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  • Youssef Zizi

    (Laboratory of Research in Organizational Management Sciences, ENCG Kenitra, Ibn Tofail University, Kenitra 14020, Morocco)

  • Mohamed Oudgou

    (Laboratory for Studies and Research in Economic Sciences and Management, ENCG Béni Mellal—University Sultane Moulay Slimane, Béni Mellal 23000, Morocco)

  • Abdeslam El Moudden

    (Laboratory of Research in Organizational Management Sciences, ENCG Kenitra, Ibn Tofail University, Kenitra 14020, Morocco)

Abstract

This paper aims to identify the determinants and predictors of Small and Medium-sized Enterprises (SMEs)’ financial failure. Within this framework, we have opted for a quantitative method based on a sample of healthy and failing SMEs of a Moroccan bank. The main results of the different optimal models are obtained by the stepwise method of estimating logistic regression. These results show, in a normal economic context, that the variables that discriminate between healthy and failing SMEs are the main predictors of financial failure. Autonomy ratio, interest to sales, asset turnover, days in accounts receivable, and duration of trade payables are the variables that increase the probability of financial failure, while repayment capacity and return on assets reduce the probability of failure. These variables present an overall classification rate of healthy and failing SMEs of 91.11% three years before failure and of 84.44% two years and one year before failure.

Suggested Citation

  • Youssef Zizi & Mohamed Oudgou & Abdeslam El Moudden, 2020. "Determinants and Predictors of SMEs’ Financial Failure: A Logistic Regression Approach," Risks, MDPI, vol. 8(4), pages 1-21, October.
    • Handle: RePEc:gam:jrisks:v:8:y:2020:i:4:p:107-:d:429254
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    2. Keijo Kohv & Oliver Lukason, 2021. "What Best Predicts Corporate Bank Loan Defaults? An Analysis of Three Different Variable Domains," Risks, MDPI, vol. 9(2), pages 1-19, January.
    3. Mohamed Oudgou & Abdeslam Boudhar, 2023. "The bank–SME relationship and rationing risk reduction: an empirical study on survey data," SN Business & Economics, Springer, vol. 3(8), pages 1-39, August.
    4. Koura Abdelghani & Boudhar Abdeslam & Mohamed Koura Oudgou, 2024. "Advancements in the Moroccan SMEs' Financing Ecosystem Catalysing SME Development through Funding strategic Investment," Post-Print hal-04681802, HAL.

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