Public vs Private SMEs: A comparison of distress hazard

Jairaj Gupta, Andros Gregoriou, Gbenga Ibikunle

Research output: Working paper › Research

Abstract

This study considers listed and unlisted small and medium-sized enterprises (SMEs) of the United States separately while developing one-year financial distress prediction model for them. Empirical analysis of financial distress performed using discrete-time duration-dependent hazard rate modelling technique with logit link and a set of financial covariates reveal striking differences between distress hazard of listed and unlisted SMEs. Almost an identical set of covariates exhibit significant discriminatory power for both listed and unlisted SMEs, but there exist significant differences in their weights of regression coefficients in respective groups. Further, Average Marginal Effects of respective covariates for unlisted group of SMEs are strikingly higher than their listed counterparts, suggesting higher vulnerability of unlisted firms due to changes in financial ratios. Our findings support the view that stock exchange listing can relieve SMEs from external financing constraints, thus reducing their likelihood of financial distress.
Original languageEnglish
DOIs
Publication statusPublished - 24 Apr 2015

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Public-private
Distress
Hazard
Small and medium-sized enterprises
Covariates
Financial distress
Marginal effects
Exchange listing
Prediction model
Modeling
External financing
Stock exchange
Financial ratios
Logit
Financing constraints
Discrete-time
Coefficients
Empirical analysis
Hazard rate
Vulnerability

Keywords

  • Financial Distress
  • SMEs
  • Discrete Hazard Models
  • Liquidity, Credit Risk

Cite this

Gupta, Jairaj ; Gregoriou, Andros ; Ibikunle, Gbenga. / Public vs Private SMEs: A comparison of distress hazard. 2015.
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Gupta, J, Gregoriou, A & Ibikunle, G 2015 'Public vs Private SMEs: A comparison of distress hazard'. https://doi.org/http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2594865

Public vs Private SMEs: A comparison of distress hazard. / Gupta, Jairaj; Gregoriou, Andros; Ibikunle, Gbenga.

2015.

Research output: Working paper › Research

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N2 - This study considers listed and unlisted small and medium-sized enterprises (SMEs) of the United States separately while developing one-year financial distress prediction model for them. Empirical analysis of financial distress performed using discrete-time duration-dependent hazard rate modelling technique with logit link and a set of financial covariates reveal striking differences between distress hazard of listed and unlisted SMEs. Almost an identical set of covariates exhibit significant discriminatory power for both listed and unlisted SMEs, but there exist significant differences in their weights of regression coefficients in respective groups. Further, Average Marginal Effects of respective covariates for unlisted group of SMEs are strikingly higher than their listed counterparts, suggesting higher vulnerability of unlisted firms due to changes in financial ratios. Our findings support the view that stock exchange listing can relieve SMEs from external financing constraints, thus reducing their likelihood of financial distress.

AB - This study considers listed and unlisted small and medium-sized enterprises (SMEs) of the United States separately while developing one-year financial distress prediction model for them. Empirical analysis of financial distress performed using discrete-time duration-dependent hazard rate modelling technique with logit link and a set of financial covariates reveal striking differences between distress hazard of listed and unlisted SMEs. Almost an identical set of covariates exhibit significant discriminatory power for both listed and unlisted SMEs, but there exist significant differences in their weights of regression coefficients in respective groups. Further, Average Marginal Effects of respective covariates for unlisted group of SMEs are strikingly higher than their listed counterparts, suggesting higher vulnerability of unlisted firms due to changes in financial ratios. Our findings support the view that stock exchange listing can relieve SMEs from external financing constraints, thus reducing their likelihood of financial distress.

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Gupta J, Gregoriou A, Ibikunle G. Public vs Private SMEs: A comparison of distress hazard. 2015 Apr 24. https://doi.org/http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2594865

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