Reference : Spillovers to small business credit risk
Scientific journals : Article
Business & economic sciences : Finance
Entrepreneurship and Innovation / Audit
Spillovers to small business credit risk
Wolff, Christian mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF) >]
Small Business Economics
Yes (verified by ORBilu)
[en] Spillover effects, supply chain, small businesses, credit risk.
[en] Do large credit risk shocks spill over to small businesses and affect their real economic activity? Using information on small business credit risk, we find that small businesses show increased default and bankruptcy rates following a shock to a customer industry. On an industry level, the shock to a customer industry is followed by a decrease in industry markups, disproportionate closure of firms, and cutbacks in inventories. Our analysis quantifies the elevated credit risk among small businesses and suggests a non-negligible 0.83% increase in expected losses on a diversified loan portfolio following a credit risk shock.

This study provides banks and supervisors with greater clarity on timing and on the extent of elevated small business credit risk. It also allows them to assess the exposure of a bank portfolio to fluctuations in small business default rate. Such improved default prediction reduces credit rationing to the small business economy.
Fonds National de la Recherche - FnR
Researchers ; Professionals
FnR ; FNR970425 > Magdalena Pisa > > Essays on the performance of SME securitized notes > 01/06/2011 > 31/05/2015 > 2010

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