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THE APPLICABILITY OF THE EDMISTER MODEL FOR THE ASSESSMENT OF CREDIT RISK IN CROATIAN SMEs

Author

Listed:
  • Milos Sprcic, Danijela

    (Faculty of Economics and Business, University of Zagreb, Croatia)

  • Klepac, Marija

    (Zagrebacka banka d.d., Unicredit Group, Zagreb)

  • Suman, Paola

    (Faculty of Economics and Business, University of Zagreb, Croatia)

Abstract

In this paper the applicability of the Edmister model for the assessment of credit risk in small and medium sized enterprises (SMEs) was examined by testing the hypothesis that the Edmister model is applicable for predicting financial difficulties of SMEs in Croatia. Data from a data base of financial reports of SMEs in Croatia managed by FINA, as well as internal data and records of one of the major banks in Croatia were used. Data of 822 enterprises were collected and analysed. The Edmister Z-score was calculated for all 822 SMEs and finally only enterprises with the Edmister Z-score lower than 0.47 or higher than 0.53 (a total of 760 enterprises) were selected to the final research sample. A method of classification analysis and compliance measurement Cohen’s Kappa were used for testing the research hypothesis. On the basis of the research results, it can be concluded that the Edmister model is not applicable for predicting financial difficulties of SMEs in Croatia.

Suggested Citation

  • Milos Sprcic, Danijela & Klepac, Marija & Suman, Paola, 2013. "THE APPLICABILITY OF THE EDMISTER MODEL FOR THE ASSESSMENT OF CREDIT RISK IN CROATIAN SMEs," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 4(2), pages 163-174.
    • Handle: RePEc:ris:utmsje:0077
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    Citations

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    Cited by:

    1. Jeyhun A. Abbasov, 2017. "Financial ratios and the prediction of bankruptcy," Working Papers 1705, Central Bank of Azerbaijan Republic.

    More about this item

    Keywords

    the Edmister model; credit risk analysis; Croatian SME’s; financial difficulties; discriminant analysis; classification method; Cohen’s Kappa;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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