Abstract
The Basel II and III Accords treat loans to small firms as less sensitive to macroeconomic cyclicality than loans to larger firms. We investigate, in an intensity regression framework, whether this is appropriate using a sample of private firms. In our models, we find that accounting ratios are important mainly for ranking firms, and we identify the macro variables which are important for default prediction over time. We find little support-both in a Cox regression setting and using an additive intensity model-for the hypothesis that smaller firms are less sensitive to macroeconomic cyclicality.
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