The influence of interest rates on outstanding loans of enterprises on their structure in the bankruptcy warning system
-
DOIhttp://dx.doi.org/10.21511/ppm.21(2).2023.22
-
Article InfoVolume 21 2023, Issue #2, pp. 198-209
- Cited by
- 754 Views
-
246 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Small and medium-sized enterprises (SMEs) create more than half of the added value, providing about two-thirds of employment in most countries. However, they need more liquidity, access to credit resources, and significant outstanding loans. This study aims to identify the impact of interest rates on outstanding loans of enterprises on their structure as a way to prevent bankruptcy. The correlation-regression analysis used OECD statistical data for 2008‒2019 sampling individual countries; it showed an ambiguous situation between the interest rate and the share of outstanding loans of SMEs in the overall structure of outstanding loans. The paper verified constructed regression equations and estimated their parameters. The regression equations for Belgium, the Czech Republic, Estonia, and Latvia are statistically reliable. Thus, in Belgium and the Czech Republic, a negative relationship was recorded (r = –0.822; D = 0.675; r = –0.9274; D = 0.794; F-criterion > Ft, respectively), and in Estonia and Latvia – a positive one (r = 0.876; D = 0.767; F-criterion > F•Ft; r = 0.800; D = 0.641; F-criterion > Ft , respectively). Australia, Italy, Slovakia, and France practically do not have a corresponding relationship. The regression equations make it possible to estimate the change in the level of interest rate on the share of outstanding loans of enterprises in the overall structure of outstanding loans, make predictions of the corresponding performance indicator, and develop measures of restoring the solvency of enterprises as an essential task of preventing their bankruptcy.
- Keywords
-
JEL Classification (Paper profile tab)G33, C45, М11
-
References48
-
Tables2
-
Figures3
-
- Figure 1. Algorithm for detecting the impact of interest rate on the level of outstanding loans
- Figure 2. Rates of growth (decrease) in the level of SOLT in 2020 compared to 2010 by individual countries, %
- Figure 3. The rate of growth (decline) of the IR level in 2020 compared to 2010 by individual countries, %
-
- Table 1. The share of outstanding loans of SMEs as a percentage of the total number of outstanding loans and interest rates for SMEs by individual countries
- Table 2. Impact of interest rate (x) on the share of outstanding loans of SMEs in the overall structure of outstanding loans (Y) by individual countries
-
- Aguiar-Diaz, I., & Ruiz-Mallorqui, M. (2015). Causes and resolution of bankruptcy: The efficiency of the law. The Spanish Review of Financial Economics, 13(2), 71-80.
- Aminu, I. M., & Shariff, M. N. (2015). Influence of strategic orientation on SMEs. Access to finance in Nigeria. Asian Social Science, 11(4), 298.
- Awani, K. (2020, October 20). Factoring as an alternative tool for financing SMEs in Africa. The Making Finance Work for Africa Partnership (MFW4A).
- Beck, T., & Cull, R. (2014). SME finance in Africa (Policy Research Working Paper No. 7018). Washington, DC: World Bank Group, Development Research Group.
- Brygata, M. (2022). Consumer bankruptcy prediction using baltanced and imbalanced data. Risk, 10(2), 24.
- Casey, E., & O’Toole, C. M. (2014). Bank lending constraints, trade credit and alternative financing during the financial crisis: Evidence from European SMEs. Journal of Corporate Finance, 27, 173-193.
- Ćehajić, A., & Košak, M. (2022). Bank lending and small and medium-sized enterprises’ access to finance – Effects of macroprudential policies. Journal of International Money and Finance, 124, 102612.
- Chatterjee, S., & Simonoff, S. (2013). Handbook of regression analysis. John Wiley & Sons, Inc.
- Chilembo, T. (2021). A study of the factors affecting small and medium enterprises (SMEs) access to finance. A case of Lusaka based SMEs. American Journal of Industrial and Business Management, 11(5), 437-460.
- Damayanthi, I G. A. E., Wiagustini, N. L. P., Suartana, I W., & Rahyuda, H. (2022). Loan restructuring as a banking solution in the COVID-19 pandemic: Based on contingency theory. Banks and Bank Systems, 17(1), 196-206.
- Dawood, T. (2018). Foreign interest rate, monetary policy and bank credit. Jurnal Economi Pembangunan, 19(2), 138-155.
- El Païs Economía (EP). (2021). El BOE publica los requisitos para que las pymes puedan pedir ayudas y reestructurar su deuda. CincoDías. (In Spanish).
- Etemesi, E. M. (2017). Credit access from commercial banks and growth of small and micro enterprises in Nairobi Central Business District.
- Euler Hermes. (2021, October 6). Euler Hermes Report: After two years of decline, global insolvencies to rise in 2022 (+15%). Allianz Trade.
- European Community (EC). (2020). Council Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings.
- European Union (EU). (2007). Consolidated versions of the Treaty on European Union.
- European Union (EU). (2015). Regulation (EU) 2015/848 of the European parliament and of the council.
- Frolov, S., & Shukairi, F. (2020). Bank-centric nature of the financial system of Ukraine: Analysis of the current situation. Banks and Bank Systems, 15(3), 184-198.
- Gharaibeh, A. M. O., & Farooq, M. O. (2022). Determinants of bank lending rates: Empirical evidence from conventional retail banks in Bahrain. Banks and Bank Systems, 17(4), 140-153.
- Hanspal, T., Weber, A., & Wohlfart, J. (2020). Income and wealth shocks and expectations during the COVID-19 pandemic (CESifo Working Paper No. 13/20). Center for Economic Studies and ifo Institute (CESifo), Munich.
- Horvathova, J., Mokrisova, M., & Petruška, I. (2022). Indebtedness and profitability – A threshold model approach. Investment Management and Financial Innovations, 19(3), 13-27.
- Judicial Power of Ukraine. (2020). Sudova statystyka [Judicial statistics]. (In Ukrainian).
- Kaya, O. (2022). Determinants and consequences of SME insolvency risk during the pandemic. Economic Modelling, 115, 105958.
- Koziuk, V., Hayda, Y., Dluhopolskyi, O., & Kozlovskyi, S. (2020). Ecological performance: Ethnic fragmentation versus governance quality and sustainable development. Problemy Ekorozwoju – Problems of Sustainable Development, 15(1), 53-64.
- Kozlovskyi, S., Bilenko, D., Dluhopolskyi, O., Vitvitskyi, S., Bondarenko, O., & Korniichuk, O. (2021). Determinants of Covid-19 death rate in Europe: Empirical analysis. Problemy Ekorozwoju – Problems of Sustainable Development, 16(1), 17-28.
- Kozlovskyi, S., Butyrskyi, A., Poliakov, B., Bobkova, A., Lavrov, R., & Ivanyuta, N. (2019). Management and comprehensive assessment of the probability of bankruptcy of Ukrainian enterprises based on the methods of fuzzy sets theory. Problems and Perspectives in Management, 17(3), 370-381.
- Kozlovskyi, S., Grynyuk, R., Baltremus, O., & Ivashchenko, A. (2017). The methods of state regulation of sustainable development of agrarian sector in Ukraine. Problems and Perspectives in Management, 15(2-2), 332-343.
- Motta, V. (2020). Lack of access to external finance and SME labor productivity: Does project quality matter? Small Business Economics, 54, 119-134.
- Nasir, M. S., Oktaviani, Y., & Andriyani, N. (2022). Determinants of non-performing loans and non-performing financing level: Evidence in Indonesia 2008–2021. Banks and Bank Systems, 17(4), 116-128.
- O’Callaghan, B., Yau, N., Murdock, E., Tritsch, D., Janz, A., Blackwood, A., Purroy Sanchez, L., Sadler, A., Wen, E., Kope, H., Flodell, H., Tillman-Morris, L., Ostrovsky, N., Kitsberg, A., Lee, T., Hristov, D., Didarali, Z., Chowdhry, K., Karlubik, M., … Heeney, L. (2020). Global recovery observatory. Oxford University Economic Recovery Project.
- O’Halloran, B. (2021, December 8). Small business rescue scheme becomes law. The Irish Times.
- Petrunenko, I., Kozlovskyi, S., Bolhov, V., Akhnovska, I., Lavrov, R., & Bolgarova, N. (2022). Civilizational cycles and economic development in the context of technological transitions and global pandemics. Montenegrin Journal of Economics, 18(4), 191-202.
- Poliakov, R., & Zayukov, I. (2022). Model for preventing bankruptcy of Ukrainian enterprises in force majeure circumstances. Problems and Perspectives in Management, 20(4), 365-381.
- Poliakov, R., & Zayukov, I. (2023). Assessment of the relationship between liquidity and unprofitability of companies in preventing their bankruptcy. Problems and Perspectives in Management, 21(1), 141-153.
- Prohorovs, A. (2022). Russia’s war in Ukraine: Consequences for European countries’ businesses and economies. Journal of Risk and Financial Management, 15(7), 295.
- Qredits. (2021). Have you been affected by the corona crisis and do you need money to restructure?
- Radipere, S., & Dhliwayo, S. (2014). The role of gender and education on small business performance in the South African small enterprise sector. Mediterranean Journal of Social Sciences, 5(9), 104-110.
- Rosenbaum, E. (2022, December 15). For most American businesses, new Fed rate means loans now start at 10%-plus interest. CNBC.
- Shevchuk, O., Ilyash, O., Mazhara, G., Roshchyna, N., Hrynkevych, S., Lavrov, R., & Kozlovskyi, S. (2023). Modeling regional sustainable development in Ukrainian crisis and war. Problemy Ekorozwoju – Problems of Sustainable Development, 18(1), 37-50.
- Shosha, B., Mano, R., & Anamali, A. (2022). Businesses and COVID-19 impact, liquidity issues and failure perceptions: The case of Albania. Investment Management and Financial Innovations, 19(2), 95-106.
- Singh, C., & Wasdani, P. K. (2016). Finance for micro, small and medium-sized enterprises in India: Sources and challenges (ADBI Working Paper No. 581). Tokyo: Asian Development Bank Institute.
- State Statistics Service of Ukraine. (2021). Activities of enterprises. (In Ukrainian).
- Stiglitz, J. (1999). Interest rates, risk, and imperfect markets: Puzzles and policies. Oxford Review of Economic Policy, 15(2), 59-76.
- The Organization for Economic Cooperation and Development (OECD). (2021). An in-depth analysis of one year of SME and entrepreneurship policy responses to COVID-19: Lessons learned for the path to recovery (ECD SME and Entrepreneurship Papers No. 25). Paris: OECD Publishing.
- The Organization for Economic Cooperation and Development (OECD). (2020). Financing SMEs and Enterpreneurs: An OECD Scoreboard. Paris: OECD Publishing.
- The Organization for Economic Cooperation and Development (OECD). (2022). Financing SMEs and Enterpreneurs 2022. Paris: OECD Publishing.
- Wang, X., Han, L., & Huang, X. (2020). Bank market power and SME finance: Firm-bank evidence from European countries. Journal International Financial Markets, Institution and Money, 64, 101162.
- Worokinasih, S., & Potipiroon, W. (2019). Microfinance repayment performance of SMEs in Indonesia: Examining the roles of social capital and loan credit terms. The Journal of Behavioral Science, 14(1), 28-45.