scholarly journals The Need for Specific Modelling of Small Enterprise Default Prediction: Empirical Evidence from Italian Small Manufacturing Firms

2017 ◽  
Vol 12 (12) ◽  
pp. 251 ◽  
Author(s):  
Francesco Ciampi
Keyword(s):  
Central Italy ◽  
Manufacturing Firms ◽  
Financial Ratios ◽  
Small Enterprise ◽  
Small Enterprises ◽  
Units Of Analysis ◽  
Default Prediction ◽  
Multivariate Discriminant ◽  
Industry Sectors ◽  
Accuracy Rates

The existing literature has proved the effectiveness of financial ratios for company default prediction modelling. However, such researches rarely focus on small enterprises (SEs) as specific units of analysis. The aim of this paper is to demonstrate that SE default prediction should be modelled separately from that of large and medium-sized firms. In fact, a multivariate discriminant analysis was applied to a sample of 2,200 small manufacturing firms located in Central Italy and a SE default prediction model was developed based on a selected group of financial ratios and specifically constructed to capture the specificities of SEs’ risk profiles. Subsequently, the prediction accuracy rates obtained by this model were compared with those obtained from a second model based on a sample of 3,200 manufacturing firms situated in Central Italy which belong to all dimensional classes. The findings are the following: 1) evaluating the probability of default of SEs separately from that of larger firms improves prediction performance; 2) the predictive power of the discriminant function improves if it takes into account the different profiles of firms operating in different industry sectors; 3) this improvement is much greater for SEs compared to larger firms.

scholarly journals Predicting Micro-Enterprise Failures Using Data Mining Techniques

2019 ◽  
Vol 12 (1) ◽  
pp. 30 ◽  
Author(s):  
Aneta Ptak-Chmielewska
Keyword(s):  
Data Mining ◽  
Complex Model ◽  
Financial Ratios ◽  
Small Enterprise ◽  
Gradient Boosting ◽  
Support Vector ◽  
Small Enterprises ◽  
Data Mining Techniques ◽  
Financial Factors ◽  
Complex Models

Research analysis of small enterprises are still rare, due to lack of individual level data. Small enterprise failures are connected not only with their financial situation abut also with non-financial factors. In recent research we tend to apply more and more complex models. However, it is not so obvious that increasing complexity increases the effectiveness. In this paper the sample of 806 small enterprises were analyzed. Qualitative factors were used in modeling. Some simple and more complex models were estimated, such as logistic regression, decision trees, neural networks, gradient boosting, and support vector machines. Two hypothesis were verified: (i) not only financial ratios but also non-financial factors matter for small enterprise survival, and (ii) advanced statistical models and data mining techniques only insignificantly increase the prediction accuracy of small enterprise failures. Results show that simple models are as good as more complex model. Data mining models tend to be overfitted. Most important financial ratios in predicting small enterprise failures were: operating profitability of assets, current assets turnover, capital ratio, coverage of short-term liabilities by equity, coverage of fixed assets by equity, and the share of net financial surplus in total liabilities. Among non-financial factors only two of them were important: the sector of activity and employment.

A territorial perspective of SME’s default prediction models

2018 ◽  
Vol 35 (4) ◽  
pp. 542-563 ◽  
Author(s):  
Linda Gabbianelli
Keyword(s):  
Financial Institutions ◽  
Prediction Models ◽  
Financial Ratios ◽  
Business Failure ◽  
Competitive Strategies ◽  
Content Type ◽  
Default Prediction ◽  
Qualitative Variables ◽  
The Relationship ◽  
Accuracy Rates

Purpose The purpose of this paper is to test whether the qualitative variables regarding the territory and the firm–territory relationship can improve the accuracy rates of small business default prediction models. Design/methodology/approach The authors apply a logistic regression to a sample of 141 small Italian enterprises located in the Marche region, and the authors build two different default prediction models: one using only financial ratios and one using jointly financial ratios and variables related to the relationship between firm and territory. Findings Including variables regarding the relationships between firms and their territory, the accuracy rates of the default prediction model are significantly improved. Research limitations/implications The qualitative variables data collected are affected by subjective judgments of respondents of the firms studied. In addition, neither other qualitative variables (such as those regarding competitive strategies, or managerial skills) are included nor those variables regarding the relationships between firms and financial institutions are included. Practical implications The study suggests that financial institutions should include territory qualitative variables, and, above all, qualitative variables regarding the firm–territory relationship, when constructing business default prediction models. Including this type of variables, it could be able to reduce the tendency to place unnecessary restrictions on credit. Originality/value The field of business failure prediction modeling using variables regarding the relationship between firm–territory is a unexplored area as it count of a very few studies.

scholarly journals Using Prior Payment Behavior Variables for Small Enterprise Default Prediction Modelling

2018 ◽  
Vol 13 (4) ◽  
pp. 57
Author(s):  
Francesco Ciampi
Keyword(s):  
Logistic Regression ◽  
Prediction Accuracy ◽  
Prediction Models ◽  
The Other ◽  
Financial Ratios ◽  
Small Enterprise ◽  
Forecast Horizon ◽  
Default Prediction ◽  
Size Groups ◽  
Prediction Modelling

This study aims to verify the potential of combining prior payment behavior variables and financial ratios for SE default prediction modelling. Logistic regression was applied to a sample of 980 Italian SEs in order to calculate and compare two categories of default prediction models, one exclusively based on financial ratios and the other based also on company payment behavior related variables. The main findings are: 1) using prior payment behavior variables significantly improves the effectiveness of SE default prediction modelling; ii) the longer the forecast horizon and/or the smaller the size of the firms which are the object of analysis, the higher  the improvements in prediction accuracy that can be obtained by using also prior payment behavior variables as default predictors; iii) SE default prediction modelling should be separately implemented for different size groups of firms.

Digital Transformation of Small Enterprise Activities in the Context of Economic Security

2021 ◽  
Vol 27 (8) ◽  
pp. 654-666
Author(s):  
E. G. Pashkovskaya
Keyword(s):  
Synergetic Effect ◽  
Internet Marketing ◽  
Economic Security ◽  
Digital Transformation ◽  
Small Enterprise ◽  
Small Enterprises ◽  
Scientific Methods ◽  
Digital Ecosystem ◽  
Special Scientific ◽  
Mechanisms Of Adaptation

Aim. The presented study aims to develop recommendations for improving the existing mechanisms of adaptation of small enterprises to the uncertain conditions of the external environment associated with digitalization processes in the economy.Tasks. The author analyzes the existing mechanisms of adaptation of small enterprises to the conditions of uncertainty; substantiates the connection between the digitalization of business processes and the economic security of enterprises; proposes an original approach to the content of the mechanism of adaptation of small enterprises to the processes of digitalization.Methods. The author uses general and special scientific methods and techniques. General scientific methods include analysis and synthesis, comparison and generalization, modeling, literature review, observation, and expert assessment. Special scientific methods include factor analysis and process analysis.Results. The author substantiates the introduction of digital tools provided by Industry 4.0 and step-by-step digitalization of small enterprises in the form of original diagrams demonstrating the content of the mechanism of adaptation of enterprises to the processes of digitalization, individual elements of this mechanism (Internet marketing and its technologies), and prospects for the development of the mechanism in the form of a diagram of its integration into a large digital ecosystem (region, cluster, etc.). The most significant elements of the proposed adaptation mechanism are the mechanism of digitalization and the mechanism of economic security of small enterprises as well as their relationship and balance of interests. The study examines practical approaches to the step-by-step digitalization of small enterprise activities by assessing the efficiency of introducing certain Internet marketing tools in the activities of a small enterprise that does not directly operate in online mode (a chain of driving schools). A relevant investment project is assessed, showing the efficiency of all proposed scenarios. The author also considers the prospects of integrating small enterprises into a single digital ecosystem of a larger structure or entity (region, cluster, etc.) for a large-scale socio-economic synergetic effect that would serve as a mutual benefit for all participants of the system.Conclusions. In spite of the lack of a clear model for the digitalization of the economy in Russia and many obstacles to the successful digital transformation of small enterprises, practical digitalization mechanisms are already being developed, offering a set of step-by-step actions for small enterprises with allowance for their limited resources and prospects for development in each market. One of the success factors of digitalization is the correlation and balance between digitalization mechanisms and the economic security of enterprises. By adopting international approaches to Internet marketing technologies, a modern small enterprise gains a significant strategic advantage in the long term.

scholarly journals TO ASSESS THE POSITION OF SMALL MANUFACTURING ENTERPRISES IN ECONOMIC DEVELOPMENT IN ETHOPIA

2019 ◽  
Vol 7 (8) ◽  
pp. 478-488
Author(s):  
Shefali Gupta
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Informal Economy ◽  
Poverty Alleviation ◽  
Small Enterprise ◽  
Tax Revenue ◽  
Small Enterprises ◽  
Corporate Sector ◽  
Manufacturing Enterprises ◽  
Micro And Small Enterprises

Development of micro and small enterprises holds the attraction of being the most important component of broader economic development and poverty alleviation. They are seen as a key and sustainable generator of employment and income for citizens and tax revenue for the state. They also serve as a bridge between informal economy and the formalized corporate sector in developing countries. Likewise, if they are able to meet the required export quality and standards, for some countries they are a source of foreign exchange earnings. It is also believed that a variant micro and small enterprise sector helps to encourage competition since they are favorable to bring about economic growth.

scholarly journals Empirics of Korean Shipping Companies’ Default Predictions

Risks ◽  
2021 ◽  
Vol 9 (9) ◽  
pp. 159
Author(s):  
Sunghwa Park ◽  
Hyunsok Kim ◽  
Janghan Kwon ◽  
Taeil Kim
Keyword(s):  
Logit Model ◽  
Prediction Models ◽  
Predictive Ability ◽  
Financial Ratios ◽  
Probability Of Default ◽  
Shipping Industry ◽  
Market Participants ◽  
Korean Economy ◽  
Default Prediction ◽  
Financial Characteristics

In this paper, we use a logit model to predict the probability of default for Korean shipping companies. We explore numerous financial ratios to find predictors of a shipping firm’s failure and construct four default prediction models. The results suggest that a model with industry specific indicators outperforms other models in predictive ability. This finding indicates that utilizing information about unique financial characteristics of the shipping industry may enhance the performance of default prediction models. Given the importance of the shipping industry in the Korean economy, this study can benefit both policymakers and market participants.

scholarly journals Challenges and Opportunities of Micro and Small Enterprises Strategy in Ethiopia Urban development, the case of Ambo Town, Oromia, Ethiopia#

2018 ◽  
Vol 9 (2) ◽  
pp. 55
Author(s):  
Yared Teshome Geneti
Keyword(s):  
Social Development ◽  
Good Governance ◽  
Local Governance ◽  
National Development ◽  
Small Enterprise ◽  
Primary Data ◽  
Small Enterprises ◽  
Market Place ◽  
Challenges And Opportunities ◽  
Micro And Small Enterprises

In Ethiopia, Micro and Small Enterprise (MSE) is prioritised as important means of economic diversification, job creation, income generation and equity distribution as indispensable poverty reduction sector since 2006. Despite the great attention given to micro and small enterprises, little research exists that examines challenges and opportunities of the Sector in the implementation trajectory. With the new initiative of National Development Programme to Accelerate Sustainable Development to Eradicate Poverty (PASDEP) in 2006-2010, the government has been commencing a new Micro and Small Enterprises Development Strategy. However, the blue prints strategy would be able to prove in the process to achieve the goals and target through timely evaluation of its implementations. It has been long time and common to listen and observe complains of MSEs on the overall sectoral performance and strategic incompatibility both among the unemployed societies and existing MSEs. Based on this rationale, the study was intended to assess the challenges and opportunities of the existing MSE strategy in Ambo town. In this descriptive research primary data were collected from 135 MSEs in Ambo using stratified and purposive sampling design.<br />MSEs in Ambo town are facing different challenges. These challenges are identified as marketing, financial, good governance, i.e., lack of market place; inadequacy credit facilities and inefficient service delivery. The study shows that the long and delayed procedure to establish MSEs is the most common challenges observed in both the old (2006) and new (2011) strategies. These are mainly as a result of inefficient human resource capacities of the sector and cumbersome procedures of credit and saving institution in the town. Moreover, a little understanding of unemployed society on the strategy is the main gap creating misunderstandings. Findings indicated that, the above challenges are a bottle-neck to the goal set by the strategy to create jobs for unemployment and being urban base of local economic and social development. In prospect wise, the study asserted that, the 2011 strategy has been improving MSEs to have a clear definition, typical set ups and structure arrangements as enterprise. Therefore, the strategy has identified as the means to change the societal structure by creating broad local economic and social development to the extent of medium investors. Finally, promoting awareness to active unemployed citizens by giving continues capacity building for both office staff and members of enterprises, local governance reforms and the rechecking of MSE establishment procedures are important in alleviating the problems at implementation stage.

scholarly journals THE IMPACT AND THE ROLE OF THE SMALL AND MEDIUM ENTERPRISES ON THE EMPLOYMENT IN THE REPUBLIC OF MACEDONIA

2018 ◽  
Vol 28 (1) ◽  
pp. 105-110
Author(s):  
Snezana Bardarova ◽  
Marija Magdincheva-Shopova ◽  
Monika Markovska ◽  
Bozhidar Milenkovski
Keyword(s):  
Economic Growth ◽  
Small And Medium Enterprises ◽  
High Rate ◽  
Small Enterprise ◽  
Small Enterprises ◽  
Republic Of Macedonia ◽  
Area Of Interest ◽  
The Republic ◽  
Medium Enterprises ◽  
The Impact

Current developments in the global and national economics point to a number of problems faced by real entities in the real sector, and as a special area of interest for the scientific public there is a need to provide conditions for the smooth running of the reproduction processes in the enterprise and the realization the positive results of the operation. Enterprises are drivers of inclusive economic growth in the Republic of Macedonia and in creating productive and sustainable jobs.The new conception of the small enterprise as a carrier and engine of economic development is quite persuasive with its economic logic and reaffirms the small enterprise as a significant economic sector. The activities within the small enterprises are aimed at intensifying the results of the work by achieving a balance between objective possibilities and good working principles. The monitoring of the small enterprise, through the prism of its influence on economic growth and development, rejects the traditional view for small enterprises as security guards.The SME sector is a driver of inclusive economic growth in Macedonia and the creation of sustainable jobs increasing productivity. It also does not agree with the notion that small enterprises are economically inefficient organisms.With the third technological revolution in the countries with a developed market economy, the domination of the so-called. small economy, that is, the sector of small and medium enterprises. Today, small enterprises have a growing number of supporters who believe that small enterprises are carriers of innovation and entrepreneurship and are able to react quickly to changes in the environment. For years, the Republic of Macedonia has faced a high rate (29%, June 2013) of general unemployment, which remains a key challenge for stabilizing the economic and social development of the country. The subject of research in this paper is focused on conducting analysis of the active enterprises in the Republic of Macedonia by size, by sector and by number of employees, as well as analysis of the activity of the population and employment by sectors and by type of ownership of the enterprise in the period from 2013-2017.

scholarly journals An Empirical Study on the Default Prediction Model in Small and Medium-Sized Enterprises Using Financial Ratios

2020 ◽  
Vol 11 (2) ◽  
pp. 129
Author(s):  
Changyong Yang ◽  
Yen-yoo You
Keyword(s):  
Prediction Model ◽  
Capital Adequacy ◽  
Financial Ratios ◽  
Investment Efficiency ◽  
Cost Burden ◽  
Financial Cost ◽  
Operating Profit ◽  
Default Prediction ◽  
Capital Adequacy Ratio ◽  
Equity Ratio

Background/Objectives: There were many studies and empirical analysis of the default prediction model using the financial ratios of large companies, such as listed companies, but despite the large impact on the national economy, there was not much research on small and medium-sized enterprises due to lack of data, and it was also limited. Therefore, we studied the default prediction model of small and medium-sized enterprises through empirical analysis.Methods/Statistical analysis: The nine financial ratios that were estimated to have a high level of default prediction power are used in the screening of guarantee support by the Korea Credit Guarantee Fund, a public institution that supports small and medium-sized enterprises comprehensively, were verified through discriminant analysis to determine whether there was a significant difference between the default companies and the normal companies. Between 2014 and 2016, 429 companies that took out loans with support from the Korea Credit Guarantee Fund were analyzed by using the statistical program SPSS 22.Findings: The nine financial ratios (capital adequacy ratio, debt to equity ratio, total borrowings to total assets, ratio of operating profit to total capitals, ratio operating profit to sales, financial cost burden ratio, total assets turnover ratio, total capitals investment efficiency, cash flow to current liabilities) were useful in combining to distinguish between default and normal companies. All nine financial ratios were significant in distinguishing between default and normal companies. The discriminant power was significant in order of financial cost burden ratio, ratio of operating profit to total capitals, ratio of operating profit to sales, capital adequacy ratio, debt to equity ratio, total borrowings to total assets, cash flow to current liabilities, total capitals investment efficiency, and total assets turnover ratio.Improvements/Applications: This study provided a default prediction model in small and medium-sized enterprises by conducting empirical analysis of small and medium-sized enterprises. It can be said that it is meaningful to be able to use this study model as an indicator to predict the default of small and medium-sized enterprises and to proactively manage the negative impact on the national economy.

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