Default Risk Analysis in Micro, Small and Medium Enterprises: Does Debt Overhang Theory Occur?

Deskripsi

This paper intends to analysethe default risk in micro, small and medium enterprises(MSMEs) and its relation to new debt opportunities, debt overhang theory and growth intention. Theresults confirm that cash flow, capacity and leverage are the major determinants of firms’default,while gross margin and efficiency measure are not significant predictors. By analysingthe rating transition behaviour, we found that the further the rating migrates, the smaller the probability of transitionand that the probability towards default is greater along with the decreased quality rating. By extending the analysis, we found that the debt overhang theory is not applied in relationshipsbetween banks and MSMEs.