Predicting rapid-growth SMEs through a reversal of credit-scoring principles
by Gabriele Sampagnaro
International Journal of Entrepreneurship and Small Business (IJESB), Vol. 18, No. 3, 2013

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).

Online publication date: Mon, 30-Sep-2013

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