Factors that affect the default risk of SMEs in Metro Manila using principal component and multiple regression analysis

• Main Authors: Avengoza, Jana Patricia, Cristobal, Marc, Dominguez, Gabrielle, Inocencio, Celcia Jane
• Format: text
• Language: English
• Published: Animo Repository 2017
• Subjects: Small business > Finance > Philippines; Small business > Philippines; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/8884
• Institution: De La Salle University

Small and medium enterprises, also known as SMEs, are said to be very beneficial yet one of the most undermined in the economy. It has been noted in many studies that other countries have been focusing on the funding of their SME because of all the potential that it has. The effect of abundant funding of SMEs is believed to have a huge effect on the country economy. In the present day, small and medium enterprises have a difficult time on their financing. SMEs are encouraged nowadays to thrive because it is a source of economic growth. Notwithstanding, many have contemplated how the SMEs could be trusted by banks as a result of the conceivable default risk. The research dwells on what factors could affect the default risk of SMEs. This would further help the academe and the SMEs in finding the possible causes that could affect their future credit applications. The researchers used principal component and multiple regression analysis. The results of the study show that there is an insignificant relationship with regard to the factors namely, firm size, loan size, management risk, commercial risk and the ability to repay. These risks show a statistically insignificant result, and show that default risk is not dependent on these factors.