Using corporate social responsibility orientation characteristics for small enterprise default prediction (Online Published: December 27, 2017)

This study aims to analyse whether the characteristics of a company’s corporate social responsibility (CSR) orientation could improve the accuracy rates of small enterprise (SE) bankruptcy prediction models. A sample made up of 382 Italian SEs is analysed and, by applying logistic regression, a SE default prediction model is designed using both CSR orientation characteristics and financial ratios as default predictors. The accuracy of this model is then compared to that of a second model based only on financial ratios as predictive variables. The main results are: i) using CSR orientation characteristics significantly improves the effectiveness of SE default prediction modelling; ii) the smaller a firm the higher the increase in the prediction accuracy that can be obtained by using CSR characteristics as default predictors; iii) SE default prediction modelling should be separately implemented for different size groups of firms.