Journal of Financial Services Marketing

, Volume 14, Issue 4, pp 301–313 | Cite as

Predicting default of Russian SMEs on the basis of financial and non-financial variables

  • Lyudmila Lugovskaya
Original Article


This article develops two models for predicting the default of Russian Small and Medium-sized Enterprises (SMEs). The most general questions that the article attempts to answer are ‘Can the default risk of Russian SMEs be assessed with a statistical model?’ and ‘Would it sufficiently demonstrate high predictive accuracy?’ The article uses a relatively large data set of financial statements and employs discriminant analysis as a statistical methodology. Default is defined as legal bankruptcy. The basic model contains only financial ratios; it is extended by adding size and age variables. Liquidity and profitability turned out to be the key factors in predicting default. The resulting models have high predictive accuracy and have the potential to be of practical use in Russian SME lending.


credit scoring default prediction small business Russia 


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Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Ltd 2010

Authors and Affiliations

  • Lyudmila Lugovskaya
    • 1
  1. 1.CambridgeUK

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