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Parametric Conditions of High Financial Risk in the SME Sector

1
The Management Faculty, Czestochowa University of Technology, Armii Krajowej 19B, 42-201 Czestochowa, Poland
2
Faculty of Economic and Management Sciences, North-West University Vaal Triangle Campus, P.O. Box 1174, Vanderbijlpark 1900, South Africa
*
Author to whom correspondence should be addressed.
Risks 2019, 7(3), 84; https://doi.org/10.3390/risks7030084
Received: 11 June 2019 / Revised: 23 July 2019 / Accepted: 29 July 2019 / Published: 1 August 2019
The sector of SME is the major force for the national economic and social development. Financial risk is one of the key threats to the activity of small and medium enterprises. The most common manifestation of the financial risk of SMEs is difficulty in financing the business and lack of funds for development. Banks are unwilling to grant loans to such companies. Moreover, it is the rising operating costs that cause shrinking profits, which may result in corporate debt, difficulty in debt repayment, and consequently, high financial risk of these entities. Numerous differences in conducting the activity of small and large enterprises intensify this risk and mean that the model of credit financing for companies is not adjusted to the capabilities and principles of the operation of small enterprises. Therefore, risk management is one of the most important internal processes in small and medium enterprises. The identification of factors that affect the level of financial risk in these entities is therefore crucial. The main objective of this research was to analyze the impact of selected parametric characteristics of the SME sector on the intensity of financial risk they take. This objective was accomplished on the basis of the survey with the participation of Polish SMEs. In order to test the adopted research assumptions, the linear regression model was used with four continuous variables for each type of the identified financial risk. Based on the final research results, the logit model was obtained for the risk of insufficient profits. It was indicated that both the internationalization of the company and the ability to manage risk are the only factors that affect a high level of risk of low income. The article ends with the discussion and the comparison with some previous research in this area. View Full-Text
Keywords: SME sector; financial risk; risk assessment SME sector; financial risk; risk assessment
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Ślusarczyk, B.; Grondys, K. Parametric Conditions of High Financial Risk in the SME Sector. Risks 2019, 7, 84.

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