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A synthetic indicator of financial pressure for spanish firms

Author

Listed:
  • Andrew Benito

    (Bank of England)

  • Francisco Javier Delgado

    (Banco de España)

  • Jorge Martínez Pagés

    (Banco de España)

Abstract

In this paper, we construct a firm-level estimate of the probability of default for a large sample of Spanish firms that can be interpreted as a composite measure of individual corporate financial pressure. By combining firms' accounting data from the Central Balance Sheet Data Office of the Banco de España with credit data from the Spanish Central Credit Register, we obtain a large data set (80,701 observations) covering a significantly longer time period (1985-2001) than is usual in the literature. Our results point to the importance of income leverage (together with other relatively standard financial ratios) for the financial pressure on firms, but also to the relevance of non-linearities and the inability of purely firm-level variables to capture completely the temporal behaviour of aggregate firm default rates. Thus, the real GDP growth rate and an average interest cost of debt are significant additional predictors of a firm's probability of default.

Suggested Citation

  • Andrew Benito & Francisco Javier Delgado & Jorge Martínez Pagés, 2004. "A synthetic indicator of financial pressure for spanish firms," Working Papers 0411, Banco de España.
    • Handle: RePEc:bde:wpaper:0411
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    Citations

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    Cited by:

    1. M. A. Lagesh & Maram Srikanth & Debashis Acharya, 2018. "Corporate Performance during Business Cycles: Evidence from Indian Manufacturing Firms," Global Business Review, International Management Institute, vol. 19(5), pages 1261-1274, October.
    2. Bruneau, C. & de Bandt, O. & El Amri, W., 2012. "Macroeconomic fluctuations and corporate financial fragility," Journal of Financial Stability, Elsevier, vol. 8(4), pages 219-235.
    3. Bonfim, Diana, 2009. "Credit risk drivers: Evaluating the contribution of firm level information and of macroeconomic dynamics," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 281-299, February.
    4. Suzan Hol, 2006. "The influence of the business cycle on bankruptcy probability," Discussion Papers 466, Statistics Norway, Research Department.
    5. Neagu, Florian & Tatarici, Luminița & Dragu, Florin & Stamate, Amalia, 2024. "Are green loans less risky? Micro-evidence from a European Emerging Economy," Journal of Financial Stability, Elsevier, vol. 70(C).
    6. Jean-Charles Bricongne & Mathilde Dufouleur, 2024. "Impact of Insolvency Regimes on NPLs: Two Birds in the Bush is Worth One in the Hand," Working papers 953, Banque de France.
    7. Petr JAKUBÍK, 2007. "Macroeconomic Environment and Credit Risk (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(1-2), pages 60-78, March.
    8. Javier Gutiérrez Rueda, 2010. "Un análisis de riesgo de crédito de las empresas del sector real y sus determinantes," Vniversitas Económica 8291, Universidad Javeriana - Bogotá.
    9. Daniel Law & Mr. Shaun K. Roache, 2015. "Assessing Default Risks for Chinese Firms: A Lost Cause?," IMF Working Papers 2015/140, International Monetary Fund.
    10. Apergis, Nicholas, 2019. "Oil prices and corporate high-yield spreads: Evidence from panels of nonenergy and energy European firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 34-40.
    11. Maria Clara Soares, 2007. "Modelling of an Indicator for Credit Scoring of Non-Financial Corporations – a Preliminary Research Based on Discriminant Analysis," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    12. Petr Jakubík, 2006. "Does Credit Risk Vary with Economic Cycles? The Case of Finland," Working Papers IES 2006/11, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006.
    13. Eduardo Acosta-González & Fernando Fernández-Rodríguez & Hicham Ganga, 2019. "Predicting Corporate Financial Failure Using Macroeconomic Variables and Accounting Data," Computational Economics, Springer;Society for Computational Economics, vol. 53(1), pages 227-257, January.
    14. Yang, Xiaolou & Hu, Yingyao, 2024. "Default risk and stock returns: From a perspective of measurement errors," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1545-1561.
    15. Faiçal Belaid, 2014. "Loan quality determinants: evaluating the contribution of bank-specific variables, macroeconomic factors and firm level information," IHEID Working Papers 04-2014, Economics Section, The Graduate Institute of International Studies.
    16. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Working Papers 0513, Banco de España.

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