Abstract
We estimate a model of credit risk for portfolios of small and medium-sized enterprises, conditional on being a nonprofit (NP) or for-profit (FP) firms. The estimation is based on a unique data set on Italian firms provided by a large commercial bank. We show that the main variables to identify creditworthiness are different for NP and FP firms. Traditional balance sheet information seems to be less crucial for NP firms.
Notes
1 Bond issues by NP firms are allowed under conditions stated in Deliberazione of 3 May 1999 of CICR published in 8 July 1999.
2 We limit our attention to limited liability nonprofit firms called ‘società cooperativa a responsabilità limitata’ (SCRL).
3 Most of existing studies draw samples from national registers without direct reference to banks’ portfolios.
4 Because of the default definition, estimated PD can be interpreted as an early warning to the bank in order to detect future situations of stress in loan repayments. There are no reasons to expect the existence of differences between nonprofit and for-profit firm w.r.t. this feature. See Luppi et al. (Citation2006).
5 A share of nondistributed earnings of the nonprofit firms is compulsory allocated as reserves.
6 Saurina and Trucharte (Citation2004) provide similar evidence for Spanish economy.