Company default and discriminant variables for SME

This chapter addresses the relationship between company default and discriminant variables in four industries: Textile, Buildings, Mechanical and Tourism. The dataset is made up of 3,137 Italian small and medium-sized enterprises (SMEs). Results show that the leverage ratios, especially the capitalization level and the interest costs over turnover are good predictors of default, together with the return on sales. Despite that, industry-specific models allow to better identify relevant ratios in each type of business, providing lower classification errors than the general model.