Clustering Default Syndromes Across Italian SMEs

Abstract

The quantitative analyses related to firms’ default prediction extensively analyzed which balance sheet ratios include significant information on the probability of default of a firm. These analyses are typically aimed at measuring a generic default risk, while no analyses are aimed at describing the syndromes affecting firms and bringing them to default. Defining syndromes, which means describing how and why firms default, can be of fundamental importance for evaluating which specific weakness a firm is affected from, and which specific intervention can fix the problem. In this paper, we analyzed a panel of Italian small and medium sized companies (SMEs) for verifying if some syndromes can be found. Results shows that the main syndromes affecting the Italian SMEs are quite similar over sectors, even if each sector is characterized by specific equilibriums and values.