Abstract / Description of output
This paper studies the effects of incorporating the interdependence among London small business defaults into risk analysis framework using the data just before the financial crisis. We propose an extension from standard scoring models to take into account the spatial dimension sand the demographic characteristics of SMEs, such as legal form,industry sector and number of employees. We estimate spatial probit models using different distance matrices based only on the spatial location or on an interaction between spatial locations and demographic characteristics. We find that the interdependence or contagion component defined on spatial and demographic characteristics is significant and that it improves the ability to predict defaults of non-start-ups in London. Furthermore, including contagion effects among SMEs alters the parameter estimates of risk determinants. The approach can be extended to other risk analysis applications where spatial risk may incorporate correlation based on other aspects.
Original language | English |
---|---|
Pages (from-to) | 71-84 |
Journal | Risk Analysis |
Volume | 39 |
Issue number | 1 |
Early online date | 11 Aug 2017 |
DOIs | |
Publication status | Published - Jan 2019 |
Keywords / Materials (for Non-textual outputs)
- spatial probit model
- proximity matrix
- small business
- scoring model
Fingerprint
Dive into the research topics of ''Birds of a feather' fail together: Exploring the nature of dependency in SME defaults'. Together they form a unique fingerprint.Profiles
-
Galina Andreeva
- Business School - Personal Chair of Societal Aspects of Credit
- Management Science and Business Economics
- Credit Research Centre
- Management Science
- Edinburgh Centre for Financial Innovations
Person: Academic: Research Active
-
Jonathan Ansell
- Business School - Professor of Risk Management
- Marketing
- Credit Research Centre
- Edinburgh Strategic Resilience Initiative
- Management Science
- Edinburgh Centre for Financial Innovations
Person: Academic: Research Active
-
Raffaella Calabrese
- Business School - Personal Chair of Data Science
- Management Science and Business Economics
- Credit Research Centre
- Management Science
- Edinburgh Centre for Financial Innovations
Person: Academic: Research Active