A novel approach to estimating the debt capacity of European SMEs

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dc.contributor.authorKaras, Michalcs
dc.contributor.authorRežňáková, Máriacs
dc.coverage.issue2cs
dc.coverage.volume18cs
dc.date.accessioned2023-08-14T14:59:28Z
dc.date.available2023-08-14T14:59:28Z
dc.date.issued2023-06-30cs
dc.description.abstractResearch background: The concept of debt capacity assumes that a maximum value of debt ratio exists that when exceeded triggers unfavourable consequences, such as drop in market value, default or a change in the business' creditworthiness. With the current state of the art there is a priori no theoretical assurance that such a specific value exists, or rather it is repre-sented by an interval of values. Beyond that, our understanding of debt capacity is often limited to a theoretical approximation by firm-specific factors, while the context of macroeco-nomic factors, especially those critical for SMEs, is neglected.Purpose of the article: The aim of this paper is to present a novel approach to estimating SMEs' debt capacity. Further, the aim is to answer the question of what firm-level and macro -economy conditions lead to exhausting the SMEs' debt capacity and under what conditions a specific value of maximum debt capacity could be estimated.Methods: To estimate the debt capacity, we suggest a use of an information entropy minimis-ing heuristic and the Minimal Description Length Principle. In this approach, the observed feature space is categorised into several regions. In this case, such a region represents a set of firm-and macroeconomy-specific conditions forming the debt capacity of the SMEs. To the best of our knowledge, such an approach has not yet been used in debt capacity applications.Findings & value added: We found out that the debt ratio itself provides little explanation of exhausted debt capacity, suggesting that high debt levels are compensated for by other fac-tors. By using the suggested approach, a set of more than 100 different regions was analysed. It was found that in case of five regions (sets of conditions) the debt capacity is exhausted, as the high level of debt has significant distress consequences.en
dc.formattextcs
dc.format.extent551-581cs
dc.format.mimetypeapplication/pdfcs
dc.identifier.citationEquilibrium. 2023, vol. 18, issue 2, p. 551-581.en
dc.identifier.doi10.24136/eq.2023.017cs
dc.identifier.issn1689-765Xcs
dc.identifier.orcid0000-0001-8824-1594cs
dc.identifier.orcid0000-0002-7261-607Xcs
dc.identifier.other184342cs
dc.identifier.researcheridC-1261-2018cs
dc.identifier.researcheridAAQ-6282-2020cs
dc.identifier.scopus55321000300cs
dc.identifier.scopus36125352900cs
dc.identifier.urihttp://hdl.handle.net/11012/213739
dc.language.isoencs
dc.publisherInstitute of Economic Researchcs
dc.relation.ispartofEquilibriumcs
dc.relation.urihttp://economic-research.pl/Journals/index.php/eq/article/view/2483cs
dc.rightsCreative Commons Attribution 4.0 Internationalcs
dc.rights.accessopenAccesscs
dc.rights.sherpahttp://www.sherpa.ac.uk/romeo/issn/1689-765X/cs
dc.rights.urihttp://creativecommons.org/licenses/by/4.0/cs
dc.subjectdebt capacityen
dc.subjectfinancial distressen
dc.subjectmacroeconomic factorsen
dc.subjectfinancial constraintsen
dc.titleA novel approach to estimating the debt capacity of European SMEsen
dc.type.driverarticleen
dc.type.statusPeer-revieweden
dc.type.versionpublishedVersionen
sync.item.dbidVAV-184342en
sync.item.dbtypeVAVen
sync.item.insts2023.08.14 16:59:25en
sync.item.modts2023.08.14 16:19:34en
thesis.grantorVysoké učení technické v Brně. Fakulta podnikatelská. Ústav financícs
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