Default Risk Analysis In Micro, Small And Medium Enterprises: Does Debt Overhang Theory Occur?
This paper intends to analyse the default risk in micro, small and medium enterprises (MSMEs) and its relation to new debt opportunities, debt overhang theory and growth intention. The results confirm that cash flow, capacity and leverage are the major determinants of firms’ default, while gross...
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| Format: | Article |
| Language: | English |
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Asian Academy of Management (AAM)
2014
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| Online Access: | http://eprints.usm.my/39944/ http://eprints.usm.my/39944/1/AAMJAF_10-1-5-G1_%2895-131%29.pdf |
| Summary: | This paper intends to analyse the default risk in micro, small and medium enterprises
(MSMEs) and its relation to new debt opportunities, debt overhang theory and growth
intention. The results confirm that cash flow, capacity and leverage are the major
determinants of firms’ default, while gross margin and efficiency measure are not
significant predictors. By analysing the rating transition behaviour, we found that the
further the rating migrates, the smaller the probability of transition and that the
probability towards default is greater along with the decreased quality rating. By
extending the analysis, we found that the debt overhang theory is not applied in
relationships between banks and MSMEs. |
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