The Determinants of Credit Default on Start-Up Firms. Econometric Modelling using Financial Capital, Human Capital and Industry Dynamics Variables

In this paper we investigate the behaviour of credit default in start-up companies. Using a logit regression technique on a panel data of 1430 start-ups and considering a tracking period of three years, we tested the impact on the probability of occurrence of the first credit event in financing agreements due to variables grouped into three categories: financial capital, human capital and industry dynamics. We concluded from a financial point of view, that the support provided by partners in the financing of the company’s activity, the intensity of use of assets under management and reduced debt pay-back periods, were decisive in mitigating risk of default. In addition we found that the occurrence of a credit event will only be as limited as higher the quality of human capital held by the promoter of the project in terms of educational background and management experience.