Survival analysis of Portuguese SMEs: A preliminary approach

Abstract

A high rate of corporate bankruptcy can be devastating to economic and entrepreneurial ecosystem, especially among countries with a high concentration of Micro, Small and Medium Sized Enterprises (SMEs). Most bankruptcy studies focus on large companies, ignoring the fact that SMEs play a key role in achieving the objectives of job creation and economic growth, which are particularly relevant in the peripheral countries of the European Union. Considering the relevance of these companies to the Portuguese economy and the scarcity of empirical studies, in this paper we offer a preliminary study about the determinants of survival of SMEs operating in Portugal. Unlike to the traditional models (i.e., static models tending to ignore the longitudinal factor of time to predict corporate bankruptcy) this study applies the Cox proportional risk model in order to predict, based on historical data taken from SABI, the probability whether a SME will be in financial distress. Using data between 2008-18 and controlling for spatial effect (Region), Size and Activity Sector, we found evidences on the negative relation between ownership concentration and financial distress.