Abstract
This paper stresses the importance of the intangibles, derivatives and local banks in determining SME’s financial distress costs. Many models exist in literature regarding the estimate of the probability of financial suffering but many of these neglect the importance of variables that are not properly accounting and that characterize business activity. Thus, an analysis was carried out to identify a number of qualitative elements that affect financial distress costs of small and medium-sized enterprises (SMEs). Findings allow to stimulating debate on policies to support SMEs.
References
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Altman, E. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589‐609. doi:10.2307/2978933
Altman, E. (1984). A further empirical investigation of the bankruptcy cost question. The Journal of Finance, 39(4), 1067‐1089. doi:10.2307/2327613
Baldwin, C., & Mason, S. (1983). The Resolution of Claims in Financial Distress: The Case of Massey Ferguson. Journal of Finance, 38(2), doi:505-523. 10.2307/2327985
Beaver, W. H. (1966). Financial ratios as predictors of failures. Journal of Accounting Research, 4, 71-111. doi:10.2307/2490171
Berger, A. N., & Udell G. F. (2006). A more complete conceptual framework for SME finance. Journal of Banking and Finance, 30(11), 2945-2966. doi:10.1016/j.jbankfin.2006.05.008
Buckmaster, N. (2000). The performance measurement panacea. Accounting Forum, 24(3), 264.
Bulot, N., Salamudin, N., & Abd Aziz, R. (2015). Size of indirect financial distress costs: which factors are reliably important? Jurnal Intelek, 12(1), 12-20. doi:10.13140/RG.2.1.4877.2568
Campello, M., & Giambona, E. (2011). Capital structure and the redeployability of tangible assets. Retrieved November 30, 2011, from https://papers.tinbergen.nl/11091.pdf
Casey, E., & O’Toole, C. (2014). Bank lending constraints, trade credit and alternative financing during the financial crisis: Evidence from European SMEs. Journal of Corporate Finance, 27, 173-193. doi:10.1016/j.jcorpfin.2014.05.001
Catasùs, B., & Gröjer, J. E. (2003). Intangibles and credit decisions: results from an experiment. European Accounting Review, 12(2), 327-356. doi:10.1080/0963818032000089418
Ching, C. L., & Yang, J. (2000). Knowledge value chain. Journal of Management Development, 19(9), 783-793.
Cucculelli, M., & Bettinelli, C. (2015). Business models, intangibles and firm performance: evidence on corporate entrepreneurship from Italian manufacturing SMEs. Small Business Economics, 45(2), 329-350. doi:10.1007/s1118
De Bruyn, R., & Ferri G. (2005). Le ragioni delle Banche Popolari: motivi teorici ed evidenze empiriche. Genova, Italy: Disefin.
De Laurentis, G. (2011). Business credit after the crisis. Rome, Italy: Bancaria Editrice.
Degryse, H., Goeij, P., & Kappert, P. (2010). The impact of firm and industry characteristics on small firms capital structure. Small Business Economics, 38(4), 431-447. doi:10.1007/s11187-010-9281-8
Dubrovski, D. (2001). The role of customer satisfaction in achieving business excellence. Total Quality Management, 12(7-8), 920. doi:10.1080/09544120100000016
Formisano, V. (2016). Non-Knowledge Risk and Bank-Company Management. The Role of Intangibles in Rating Models. Basingstoke, Hampshire, UK: Palgrave Macmillan.
Foster, G. (2005). Financial Statement Analysis. Delhi: Pearson Education.
Gennaioli, N., & Rossi, S. (2010). Judicial discretion in corporate bankruptcy. The Review of Financial Studies, 23(11), 4078-4114. doi:10.1093/rfs/hhq079
Gopinath, C. (1995). Bank Strategies Toward Firms in Decline. Journal of Business Venturing, 10(1), 75-92. doi:10.1016/0883-9026(94)00008-I
Grice, J., & Ingram, R. (2001). Tests of the generalizability of Altman s bankruptcy prediction model. Journal of Business Research, 54(1), 53‐61. doi:10.1016/S0148-2963(00)00126-0
Gupta, J., Gregoriou, A., & Ebrahimi, T. (2015). Using hazard models correctly: a comparison employing different definitions of SMEs financial distress. Retrieved September 10, 2015, from http://eprints.brighton.ac.uk/14274/
Hainz, C., & Wiegand, M. (2013). Financing of the German Economy During the Financial Crisis. Ifo DICE Report, 11(1), 48-54.
Harris, L. C., & Ogbonna, E. (2001). Leadership style and market orientation: an empirical study. European Journal of Marketing, 35(5-6), 744-764. doi:10.1108/03090560110388196
Haushalter, D., Randall, H. A., & Lie, E. (2002). Price Uncertainty and Corporate Value. Journal of Corporate Finance: Contracting, Governance and Organization, 8(3), 271-86. doi:10.1016/S0929-1199(01)00043-8
Haushalter, G. D. (2000). Financing Policy, Basis Risk, and Corporate Hedging: Evidence from Oil and Gas Producers. The Journal of Finance, 55(1), 107-152.
Hoque, Z., Mia, L., & Alam, M. (2001). Market competition, computer-aided manufacturing and use of multiple performance measures: An empirical study. British Accounting Review, 33(1), 23-45. doi:10.1006/bare.2000.0149
Joia, L. A. (2000). Measuring intangible corporate assets: Linking business strategy with intellectual capital. Journal of Intellectual Capital, 1(1), 68-84. doi:10.1108/14691930010371636
Jostarndt, P., & Sautner, Z. (2010). Out-of-court restructuring versus formal bankruptcy in a non-interventionist bankruptcy setting. Review of Finance, 14, 623-668. doi: 10.1093/rof/rfp022
Katcher, B. L. (2003). Make more strategies use of customer satisfaction surveys. The Journal of Business Strategy, 24(1), 34-37. doi:10.1108/02756660310734893
Keasey, K., Pindado, J., & Rodrigues, L. (2015). The determinants of the costs of financial distress in SMEs. International Small Business Journal, 33(8), 862-881.
Koksal, B., Orman, C., & Oduncu A. (2013). Determinants of capital structure: evidence from a major emerging market economy. Retrieved July 19, 2013, from https://mpra.ub.uni-muenchen.de/48415/
Lim, S. C., Macias, A. J., & Moeller, T. (2014). Intangible assets and capital structure. Retrieved October 25, 2014, from https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2514551
Manzaneque, M., Priego, A. M., & Merino, E. (2016). Corporate governance effect on financial distress likelihood: Evidence from Spain. Revista de Contabilidad, 19(1), 111-121. doi:10.1016/j.rcsar.2015.04.001
Marrocu, E., Paci, R., & Pontis, M. (2012). Intangible capital and firms’ productivity. Industrial and Corporate Change, 21(2), 377-402. doi:10.1093/icc/dtr042
Mello, A. S., & Parsons, J. E. (2000). Hedging and Liquidity. The Review of Financial Studies, 13(1), 127-153. doi:10.1093/rfs/13.1.127
Modina, M. (2015). Credit Rating and Bank-Firm Relationship: New Models to Better Evaluate SMES. Basingstoke, Hampshire, UK: Palgrave Macmillan.
Modina, M., Quintiliani, A., & Arnone, M. (2013). Il ruolo delle banche locali e del relationship lending in scenari economici in profondo cambiamento. Arethuse Rivista di studi economico-gestionali, 2, 91-106.
Nance, D. R., Smith, C. W., & Smithson, C. W. (1993). On the Determination of Corporate Hedging. Journal of Financial, 48(1), 267-284.
Ohlson J. (1980). Financial ratios and the probabilistic prediction of bankruptcy. Journal of Accounting Research, 18(1), 109‐131.
Özmen, A., Weber, G. W., & Batmaz, I. (2010). The new Robust CMARS (RCMARS) method. In Proceedings of 24th Mini EURO Conference (vol. 12, pp. 362-368). Izmir, Turkey: Izmir University of Economics Press.
Özmen, A., Weber, G. W., Çavuşoğlu, Z., & Defterli, O. (2012). The new robust conic GPLM method with an application to finance: prediction of credit default. Journal of Global Optimization, 56(2), 233-249. doi:10.1007/s10898-012-9902-7
Pindado, J., Rodrigues, L., & de la Torre, C. (2008). Estimating financial distress likelihood. Journal of Business Research, 61(9), 995‐1003. doi:10.1016/j.jbusres.2007.10.006
Quintiliani, A. (2017). Financial Crisis and Local Banks: a Review of Bank-Firm Relationships in Italy. Corporate Ownership & Control, 14(3-1), 249-258. doi: 10.22495/cocv14i3c1art10
Roulstone, D. T. (2011). Discussion of intangible investment and the importance of firm-specific factors in the determination of earnings. Review of Accounting Studies, 16(3), 574-580. doi:10.1007/s11142-011-9149-4
Schwarz, J., Beloff, B., & Beaver, E. (2002). Use of sustainability metrics to guide decision-making. Chemical Engineering Progress, 98(7), 58-63.
Smith, C. W., & Stulz, R. M. (1985). The Determinants of Firms’ Hedging Policies. Journal of Financial and Quantitative Analysis, 20(4), 391-404. doi:10.2307/2330757
Stulz, R. M. (1984). Optimal hedging policies. Journal of Financial and Quantitative Analysis, 19(2), 127-140. doi:10.2307/2330894
Ulrich, H., & Hilmar, S. (2003). Financing the German Mittelstand. EIB Papers, 8(2), 53-90.
Unger, B. (2000). Innovation Systems and Innovative Performance: Voice Systems. Organization Studies, 21(5), 941-969. doi:10.1177/0170840600215005
Weber, G. W., Batmaz, I., Köksal, G., Taylan, P., & Yerlikaya-Özkurt, F. (2012). CMARS: a new contribution to nonparametric regression with multivariate adaptive regression splines supported by continuous optimization. Inverse Problems in Science and Engineering, 20(3),
371-400. doi:10.1080/17415977.2011.624770
Zmijewski, M. (1984). Methodological issues related to the estimation of financial distress prediction models. Journal of Accounting Research, 22, 59‐82. doi:10.2307/2490859
Allayannis, G., & Ofek, E. (2001). Exchange Rate Exposure, Hedging, and the Use of Foreign Currency Derivatives. Journal of International Money and Finance, 20(2), 273-296. doi:10.1016/S0261-5606(00)00050-4
Altman, E. (1968). Financial ratios, discriminant analysis and the prediction of corporate bankruptcy. The Journal of Finance, 23(4), 589‐609. doi:10.2307/2978933
Altman, E. (1984). A further empirical investigation of the bankruptcy cost question. The Journal of Finance, 39(4), 1067‐1089. doi:10.2307/2327613
Baldwin, C., & Mason, S. (1983). The Resolution of Claims in Financial Distress: The Case of Massey Ferguson. Journal of Finance, 38(2), doi:505-523. 10.2307/2327985
Beaver, W. H. (1966). Financial ratios as predictors of failures. Journal of Accounting Research, 4, 71-111. doi:10.2307/2490171
Berger, A. N., & Udell G. F. (2006). A more complete conceptual framework for SME finance. Journal of Banking and Finance, 30(11), 2945-2966. doi:10.1016/j.jbankfin.2006.05.008
Buckmaster, N. (2000). The performance measurement panacea. Accounting Forum, 24(3), 264.
Bulot, N., Salamudin, N., & Abd Aziz, R. (2015). Size of indirect financial distress costs: which factors are reliably important? Jurnal Intelek, 12(1), 12-20. doi:10.13140/RG.2.1.4877.2568
Campello, M., & Giambona, E. (2011). Capital structure and the redeployability of tangible assets. Retrieved November 30, 2011, from https://papers.tinbergen.nl/11091.pdf
Casey, E., & O’Toole, C. (2014). Bank lending constraints, trade credit and alternative financing during the financial crisis: Evidence from European SMEs. Journal of Corporate Finance, 27, 173-193. doi:10.1016/j.jcorpfin.2014.05.001
Catasùs, B., & Gröjer, J. E. (2003). Intangibles and credit decisions: results from an experiment. European Accounting Review, 12(2), 327-356. doi:10.1080/0963818032000089418
Ching, C. L., & Yang, J. (2000). Knowledge value chain. Journal of Management Development, 19(9), 783-793.
Cucculelli, M., & Bettinelli, C. (2015). Business models, intangibles and firm performance: evidence on corporate entrepreneurship from Italian manufacturing SMEs. Small Business Economics, 45(2), 329-350. doi:10.1007/s1118
De Bruyn, R., & Ferri G. (2005). Le ragioni delle Banche Popolari: motivi teorici ed evidenze empiriche. Genova, Italy: Disefin.
De Laurentis, G. (2011). Business credit after the crisis. Rome, Italy: Bancaria Editrice.
Degryse, H., Goeij, P., & Kappert, P. (2010). The impact of firm and industry characteristics on small firms capital structure. Small Business Economics, 38(4), 431-447. doi:10.1007/s11187-010-9281-8
Dubrovski, D. (2001). The role of customer satisfaction in achieving business excellence. Total Quality Management, 12(7-8), 920. doi:10.1080/09544120100000016
Formisano, V. (2016). Non-Knowledge Risk and Bank-Company Management. The Role of Intangibles in Rating Models. Basingstoke, Hampshire, UK: Palgrave Macmillan.
Foster, G. (2005). Financial Statement Analysis. Delhi: Pearson Education.
Gennaioli, N., & Rossi, S. (2010). Judicial discretion in corporate bankruptcy. The Review of Financial Studies, 23(11), 4078-4114. doi:10.1093/rfs/hhq079
Gopinath, C. (1995). Bank Strategies Toward Firms in Decline. Journal of Business Venturing, 10(1), 75-92. doi:10.1016/0883-9026(94)00008-I
Grice, J., & Ingram, R. (2001). Tests of the generalizability of Altman s bankruptcy prediction model. Journal of Business Research, 54(1), 53‐61. doi:10.1016/S0148-2963(00)00126-0
Gupta, J., Gregoriou, A., & Ebrahimi, T. (2015). Using hazard models correctly: a comparison employing different definitions of SMEs financial distress. Retrieved September 10, 2015, from http://eprints.brighton.ac.uk/14274/
Hainz, C., & Wiegand, M. (2013). Financing of the German Economy During the Financial Crisis. Ifo DICE Report, 11(1), 48-54.
Harris, L. C., & Ogbonna, E. (2001). Leadership style and market orientation: an empirical study. European Journal of Marketing, 35(5-6), 744-764. doi:10.1108/03090560110388196
Haushalter, D., Randall, H. A., & Lie, E. (2002). Price Uncertainty and Corporate Value. Journal of Corporate Finance: Contracting, Governance and Organization, 8(3), 271-86. doi:10.1016/S0929-1199(01)00043-8
Haushalter, G. D. (2000). Financing Policy, Basis Risk, and Corporate Hedging: Evidence from Oil and Gas Producers. The Journal of Finance, 55(1), 107-152.
Hoque, Z., Mia, L., & Alam, M. (2001). Market competition, computer-aided manufacturing and use of multiple performance measures: An empirical study. British Accounting Review, 33(1), 23-45. doi:10.1006/bare.2000.0149
Joia, L. A. (2000). Measuring intangible corporate assets: Linking business strategy with intellectual capital. Journal of Intellectual Capital, 1(1), 68-84. doi:10.1108/14691930010371636
Jostarndt, P., & Sautner, Z. (2010). Out-of-court restructuring versus formal bankruptcy in a non-interventionist bankruptcy setting. Review of Finance, 14, 623-668. doi: 10.1093/rof/rfp022
Katcher, B. L. (2003). Make more strategies use of customer satisfaction surveys. The Journal of Business Strategy, 24(1), 34-37. doi:10.1108/02756660310734893
Keasey, K., Pindado, J., & Rodrigues, L. (2015). The determinants of the costs of financial distress in SMEs. International Small Business Journal, 33(8), 862-881.
Koksal, B., Orman, C., & Oduncu A. (2013). Determinants of capital structure: evidence from a major emerging market economy. Retrieved July 19, 2013, from https://mpra.ub.uni-muenchen.de/48415/
Lim, S. C., Macias, A. J., & Moeller, T. (2014). Intangible assets and capital structure. Retrieved October 25, 2014, from https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2514551
Manzaneque, M., Priego, A. M., & Merino, E. (2016). Corporate governance effect on financial distress likelihood: Evidence from Spain. Revista de Contabilidad, 19(1), 111-121. doi:10.1016/j.rcsar.2015.04.001
Marrocu, E., Paci, R., & Pontis, M. (2012). Intangible capital and firms’ productivity. Industrial and Corporate Change, 21(2), 377-402. doi:10.1093/icc/dtr042
Mello, A. S., & Parsons, J. E. (2000). Hedging and Liquidity. The Review of Financial Studies, 13(1), 127-153. doi:10.1093/rfs/13.1.127
Modina, M. (2015). Credit Rating and Bank-Firm Relationship: New Models to Better Evaluate SMES. Basingstoke, Hampshire, UK: Palgrave Macmillan.
Modina, M., Quintiliani, A., & Arnone, M. (2013). Il ruolo delle banche locali e del relationship lending in scenari economici in profondo cambiamento. Arethuse Rivista di studi economico-gestionali, 2, 91-106.
Nance, D. R., Smith, C. W., & Smithson, C. W. (1993). On the Determination of Corporate Hedging. Journal of Financial, 48(1), 267-284.
Ohlson J. (1980). Financial ratios and the probabilistic prediction of bankruptcy. Journal of Accounting Research, 18(1), 109‐131.
Özmen, A., Weber, G. W., & Batmaz, I. (2010). The new Robust CMARS (RCMARS) method. In Proceedings of 24th Mini EURO Conference (vol. 12, pp. 362-368). Izmir, Turkey: Izmir University of Economics Press.
Özmen, A., Weber, G. W., Çavuşoğlu, Z., & Defterli, O. (2012). The new robust conic GPLM method with an application to finance: prediction of credit default. Journal of Global Optimization, 56(2), 233-249. doi:10.1007/s10898-012-9902-7
Pindado, J., Rodrigues, L., & de la Torre, C. (2008). Estimating financial distress likelihood. Journal of Business Research, 61(9), 995‐1003. doi:10.1016/j.jbusres.2007.10.006
Quintiliani, A. (2017). Financial Crisis and Local Banks: a Review of Bank-Firm Relationships in Italy. Corporate Ownership & Control, 14(3-1), 249-258. doi: 10.22495/cocv14i3c1art10
Roulstone, D. T. (2011). Discussion of intangible investment and the importance of firm-specific factors in the determination of earnings. Review of Accounting Studies, 16(3), 574-580. doi:10.1007/s11142-011-9149-4
Schwarz, J., Beloff, B., & Beaver, E. (2002). Use of sustainability metrics to guide decision-making. Chemical Engineering Progress, 98(7), 58-63.
Smith, C. W., & Stulz, R. M. (1985). The Determinants of Firms’ Hedging Policies. Journal of Financial and Quantitative Analysis, 20(4), 391-404. doi:10.2307/2330757
Stulz, R. M. (1984). Optimal hedging policies. Journal of Financial and Quantitative Analysis, 19(2), 127-140. doi:10.2307/2330894
Ulrich, H., & Hilmar, S. (2003). Financing the German Mittelstand. EIB Papers, 8(2), 53-90.
Unger, B. (2000). Innovation Systems and Innovative Performance: Voice Systems. Organization Studies, 21(5), 941-969. doi:10.1177/0170840600215005
Weber, G. W., Batmaz, I., Köksal, G., Taylan, P., & Yerlikaya-Özkurt, F. (2012). CMARS: a new contribution to nonparametric regression with multivariate adaptive regression splines supported by continuous optimization. Inverse Problems in Science and Engineering, 20(3),
371-400. doi:10.1080/17415977.2011.624770
Zmijewski, M. (1984). Methodological issues related to the estimation of financial distress prediction models. Journal of Accounting Research, 22, 59‐82. doi:10.2307/2490859
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