Determinants of SME credit worthiness under Basel rules: the value of credit history information

Basel III accord is said to impact on SME financing. We aim to highlight the determinants of SME credit worthiness. We use credit history in addition to financial ratios and “hybrid” indica-tors have been built by mixing credit history with financial statement data. We develop a failure prediction logit model on 188 Italian SMEs. The usage of credit lines is the most important variable. In opposition to common understand-ings, the capitalization level does not affect ratings. Liquidity conditions (level of the lines of credit not used) and solvency conditions (financial structure equilibrium) are other two important factors. Lastly, the credit worthiness is sensitive to sale profitability.