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Default Rates in the Loan Market for SMEs: Evidence from Slovakia

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  • Jarko Fidrmuc
  • Christa Hainz

Abstract

The current crisis raises the question whether loans to SMEs in emerging markets are inherently more risky. We use a unique unbalanced panel of nearly 700 loans made to SMEs in Slovakia between 2000 and 2005. Several probit and panel probit models show that liquidity and profitability factors are important determinants of SME defaults. Moreover, we find that indebtedness significantly increases the probability of default. Finally, liability as proxied by the legal form of SMEs has important incentive effects. In sum, default rates and factors converged to values found in developed financial markets.

Suggested Citation

  • Jarko Fidrmuc & Christa Hainz, 2009. "Default Rates in the Loan Market for SMEs: Evidence from Slovakia," ifo Working Paper Series 72, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_72
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    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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