The Potential of Corporate Governance Variables for Small Enterprise Default Prediction Modeling. Statistical Evidence from Italian Manufacturing Firms. Preliminary Findings

Most studies of enterprise default prediction modeling use financial ratios as independent variables, and focus on large and medium sized enterprises. In this study, we applied logistic regression to a sample of 860 Italian small manufacturing firms, and built a business prediction model based on both financial ratios and corporate governance characteristics as independent variables. We then compared the accuracy rates obtained by this model to those from a second model, based on the same sample of firms, which used only financial ratios as predictive variables.