Title: Predicting rapid-growth SMEs through a reversal of credit-scoring principles

Authors: Gabriele Sampagnaro

Addresses: University Parthenope, Via Medina 40, Naples 80133, Italy

Abstract: The purpose of this paper is to analyse the main variables distinguishing between high-growth firms and non-high-growth firms in the Italian manufacturing market. Specifically, we aim to establish which balance-sheet ratios enable us to distinguish between high-growth and non-high-growth firms. For this purpose, we employed a discriminant analysis on the financial data of two groups of firms selected from a population of approximately 22,000 firms. The results of the analysis indicate the roles of firm size, non-financial debt and internal cash flows in the growth and success of a firm. We adopt an innovative approach that considers financial statements issued the year prior to the observation of accelerated growth as predictive of this growth (as is used by credit-scoring models, i.e., the Z-Score model, to measure the probability of default).

Keywords: high-growth firms; financial ratios; discriminant analysis; rapid-growth firms; credit scoring; non-high-growth firms; Italy; manufacturing industry; balance-sheet ratios; financial data; firm size; non-financial debt; internal cash flows; financial statements; accelerated growth; default probability; Z-Score; small and medium-sized enterprises; SMEs; entrepreneurs; entrepreneurship.

DOI: 10.1504/IJESB.2013.052519

International Journal of Entrepreneurship and Small Business, 2013 Vol.18 No.3, pp.313 - 331

Published online: 30 Sep 2013 *

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