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Effect of perceived default risk and accounting information quality on the decision to grant credit to SMEs

Abstract

The present study analyses the influence that perceived default risk and accounting information quality have on the process of credit granting to small- and medium-sized enterprises (SMEs). Empirical evidence was obtained from a survey of 471 bank loan officers in Spain, in which they were asked to answer questions relating to audited and not-audited firms. Through a structural equations modeling (SEM) approach, the results confirm that the likelihood that the loan officers are more willing to provide access to credit to SMEs, and to do so in more favourable conditions, is negatively influenced by perceived default risk and positively influenced by the general perception about accounting information quality. Besides, we find that information quality is an antecedent of perceived risk, so that the latter becomes the central element of the research model. Additionally, the perceptions of the decision-makers regarding all the analysed variables are better for the audited SMEs than for the unaudited ones.

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Notes

  1. 1.

    Section 2 of International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), published by the International Accounting Standards Board (IASB), establishes 11 qualitative characteristics (understandability, relevance, materiality, reliability, substance over form, prudence, completeness, comparability, timeliness, balance between benefit and cost, undue cost or effort) that financial information must gather. However, there are five dimensions that have been most frequently used to refer to ‘information quality’: timeliness, accuracy, completeness, relevance and reliability (see, among others, Monczka et al. 1998; Nicolaou and McKnight 2006).

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Correspondence to Estefanía Palazuelos.

Appendix 1

Appendix 1

See Table 7.

Table 7 Descriptive statistics

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Palazuelos, E., Herrero Crespo, Á. & Montoya del Corte, J. Effect of perceived default risk and accounting information quality on the decision to grant credit to SMEs. Risk Manag 20, 121–141 (2018). https://doi.org/10.1057/s41283-017-0030-z

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Keywords

  • Perceived risk
  • Information quality
  • Credit access
  • Credit conditions
  • External audit
  • SMEs