Small and medium enterprises (SMEs) have encountered several threats resulting in a high failure rate vis-à-vis unavailability of financial assistance from funding institutions. Financial assistance is triggered through financial efficiency of SMEs and an error-free credit risk assessment. This article attempts to evaluate SMEs’ financial efficiency and credit risk. Data from 2016 to 2020 are collected for 36 listed companies and analysed using the Altman Z-score to predict leeway of bankruptcy and data envelopment analysis to study the financial efficiency. Association between results of both the models shows that there does not exist a direct relation between credit risk and financial efficiency. SMEs can build a comprehensive financial portfolio using the findings of this study The study findings indicated that it lowers the asymmetry of information and leads to deciding on proper interest rates to reduce borrowers’ substantiated credit risk, as this would result in ease of funding to financially distressed SMEs.
AbbasW. A., WangZ. A., & AhmedD. (2017). Potential sources of financing for small and medium, enterprises (SMEs) and role of government in supporting SMEs. Journal of Small Business and Entrepreneurship Development, 5(2), 39–47. 10.15640/jsbed.v5n2a4
2.
AborJ., & QuarteyP. (2010). Issues in SME development in Ghana and South Africa. International Research Journal of Finance and Economics, (39), 218–228.
3.
AfrifaG. A., & TingbaniI. (2018). Working capital management, cash flow and SMEs’ performance. International Journal of Banking, Accounting and Finance, 9(1), 19–43. 10.1504/IJBAAF.2018.089421
4.
AgyapongD. (2021). Analyzing financial risks in small and medium enterprises: Evidence from the food processing firms in selected cities in Ghana. International Journal of Entrepreneurial Behavior and Research, 27(1), 45–77. 10.1108/IJEBR-05-2020-0269
5.
AhmadM. M., & AlaskariO. (2014). Development of assessment methodology for improving performance in SME’s. International Journal of Productivity and Performance Management, 63(4), 477–498. 10.1108/IJPPM-06-2013-0108
6.
AlarussiA. S., & GaoX. (2021). Determinants of profitability in Chinese companies. International Journal of Emerging Markets, 1746. 10.1108/IJOEM-04-2021-0539
7.
AwwadB., & RaziaB. (2021). Adapting Altman’s model to predict the performance of the Palestinian industrial sector. Journal of Business and Socio-economic Development, 1(2), 149–164. 10.1108/JBSED-05-2021-0063
8.
BegleyJ., MingJ., & WattsS. (1996). Bankruptcy classification errors in the 1980s: An empirical analysis of Altman’s and Ohlson’s models. Review of Accounting Studies, 1(4), 267–284. 10.1007/BF00570833
9.
BhattacharyaS., & SharmaD. (2019). Do environment, social and governance performance impact credit ratings: A study from India. International Journal of Ethics and Systems, 35(4), 466–483. 10.1108/IJOES-09-2018-0130
10.
ChenX., & WangY. (2020). Research on financing efficiency of China’s strategic emerging industries based on super efficiency DEA and tobit model. International Journal of Emerging Markets, 12(2), 485–504. 10.1108/IJOEM-02-2020-0188
11.
CookW., ToneK., & ZhuJ. (2014). Data envelopment analysis: Prior to choosing a model. Omega, 44, 1–4. 10.1016/j.omega.2013.09.004
12.
CooperW., SeifordL., & ZhuJ. (2004). Data envelopment analysis. In CooperW., SeifordL. & ZhuJ. (Eds.), International series in operations research & management science (pp. 1–39). Springer. 10.1007/1-4020-7798-X_1
13.
CsapiV., & BaloghV. (2020). Financial performance-based assessment of SMEs’ competitiveness—An analysis of Hungarian and US small businesses. Problems and Perspectives in Management, 18(3), 452–464. 0.21511/ppm.18(3).2020.37
14.
FarrellM. (1957). The measurement of productive efficiency. Journal of the Royal Statistical Society, Series A (General), 120(3), 253–281. 10.2307/2343100
15.
G20, S. (2017). Think big for small small and medium enterprises as pillar for future-oriented, sustainable growth. World SME Forum. https://www.b20germany.org/fileadmin/user_upload/documents/B20/B20_CTG_SMES_Final_Policy_Paper_2017-04-11.pdf
16.
GaoG., WangH., & GaoP. (2021). Establishing a credit risk evaluation system for SMEs using the soft voting fusion model. Risks, 9(11), 202. 10.3390/risks9110202
17.
GolanyB., & RollY. (1989). An application procedure for DEA. Omega, 17(3),237–250. 10.1016/0305-0483(89)90029-7
18.
GonçalvesT. S., FerreiraF. A., JalaliM. S., & Meidutė-KavaliauskienėI. (2016). An idiosyncratic decision support system for credit risk analysis of small and medium-sized enterprises. Technological and Economic Development of Economy, 22(4), 598–616. 10.3846/20294913.2015.1074125
19.
GuptaV., & GuptaB. (2014). Flexible strategic framework for managing innovation from perspective of continuity and change A study of SMEs in India. Business Process Management, 20(3), 502–522. 10.1108/BPMJ-05-2013-0061
20.
HampelK. D. (2021). Patients’ assessment of medical services quality—A determinant of changes in medical entity management on the example of Poland. Journal of Organizational Change Management, 34(7), 1270–1284. 10.1108/JOCM-05-2021-0146
21.
HarriR. (2017). Bank lending to small business in India: Analyzing productivity and efficiency. The Quarterly Review of Economics and Finance, 65, 16–24. 10.1016/j.qref.2016.06.003
22.
IbrahimP. A. (2021). Commercial bank finance for SMEs and credit portfolio of commercial banks in India. International Journal of Indian Culture and Business Management, 24(1), 1–18. 10.1504/IJICBM.2021.117885
23.
StoeberlP. A. (2011). Benchmarking with data envelopment analysis: A return on asset perspective. Benchmarking: An International Journal, 18(4), 529–542. 10.1108/14635771111147623
24.
JothimaniD., ShankarR., & YadavS. S. (2017). A PCA-DEA framework for stock selection in Indian stock market. Journal of Modelling in Management, 12(3), 386–403. 10.1108/JM2-09-2015-0073
25.
KangL., NiskanenJ., & NiskanenM. (2019). Capital structure and firm performance in European SMEs: Does credit risk make a difference?Managerial Finance, 45(5), 582–601. 10.1108/MF-01-2017-0018
26.
KulkarniP., & ChirputkarA. V. (2016). Impact of SME listing on capital structure decisions. Procedia Economics and Finance, 11, 434–444. 10.1016/S2212-5671(14)00210-X
27.
LemaabX. R., SaizbJ. J., Rodriguez RodriguezbandR., & VerdechobM.-J. (2020). Performance measurement in SMEs: Systematic literature review and research directions. Total Quality Management and Business Excellence, 32(4), 1–26. 10.1080/14783363.2020.1774357
28.
LiB., LiH., & GongM. (2019). Establishment of a mathematical model for enterprise credit risk recognition and rating based on hybrid learning algorithms. IOP Publishing Ltd, 563. 10.1088/1757-899X/563/5/052036
29.
MaitiM. (2018). Scope for alternative avenues to promote financial access toMSMEs in developing nation evidence from India. International Journal of Law and Management, 6(5), 1210–1222. 10.1108/IJLMA-06-2017-0141
30.
ManognaR. L., & KumarM. A. (2022). Measuring financial performance of Indian manufacturing firms: Application of decision tree algorithms. Measuring Business Excellence, 26(3), 288–307. 10.1108/MBE-05-2020-0073
31.
NailiM., & LahrichiY. (2020). The determinants of banks’ credit risk: Review of the literature and future research agenda. International Journal of Finance & Economics, 27(1), 334–360. 10.1002/ijfe.2156
32.
NathaniN., & KaurJ. (2018). Determinants of capital structure and inter industry linkages. FIIB Business Review, 2(1), 31–36. 10.1177/2455265820130108
33.
OkechukwuA. (2014). Issues, challengesand prospects of small and medium scale enterprises (SMEs) in Port-Harcourt City. European Journal of Sustainable Development, 3(1), 101–114. 10.14207/ejsd.2014.v3n1p101
34.
Organisation for Economic Co-operation and Development. (2017). https://www.oecd.org: https://www.oecd.org/mcm/documents-archive/2017/2017-ministerial-council-statement.htm
35.
PraveenkumarK., ArulmozhiS. J., & VinayagamoorthiG. (2019). Foreign direct investments on small scale industries in India. International Journal of Recent Technology and Engineering, 8(3), 384–387. 10.35940/ijrte.C1082.1083S19
36.
PriyadiU., UtamiK. D., MuhammadR., & NugraheniP. (2021). Determinants of credit risk of Indonesian Sharīah rural banks. ISRA International Journal of Islamic Finance, 13(3), 284–301. 10.1108/IJIF-09-2019-0134
37.
PsillakiM., TsolasI. E. & MargaritisD. (2010). Evaluation of credit risk based on firm performance. European Journal of Operational Research, 201(3), 873–881. 10.1016/j.ejor.2009.03.032
38.
RBI. (2002). Guidance Note on Credit Risk Management. Department of Banking Operations and Development Central Office.
39.
RoyP. K., & ShawK. (2021). A credit scoring model for SMEs using AHP and TOPSIS. International Journal of Finance & Economics, 1–20. 10.1002/ijfe.2425
40.
SetiaN., AbhayawansaS., & JoshiM. (2022). The role of integrated reporting in advancing sustainability: Reflections from academic literature and a future research agenda. Exploring the Latest Trends in Management Literature, 1, 185–206. 10.1108/S2754-586520220000001010
41.
ShaoQ., YuanJ., LinJ., HuangW., MaJ., & DingH. (2021). A SBM-DEA based performance evaluation and optimization for social organizations participating in community and home-based elderly care services. PLoS ONE, 1–25. 10.1371/journal.pone.0248474
42.
SinghR. K., GargS. K., & DeshmukhS. G. (2008). Competency and performance analysis of Indian SMEs and large organizations. Competitiveness Review: An International Business Journal, 18(4), 308–321. 10.1108/01409171011011562
43.
SinghR. K., GargS. K., & DeshmukhS. G. (2010). The competitiveness of SMEs in a globalized economy observations from China and India. Management Research Review, 33(1), 54–65. 10.1108/10595420810920798
44.
SinghS., SidhuJ., JoshiM., & KansaM. (2016). Measuring intellectual capital performance of Indian banks A public and private sector comparison. Managerial Finance, 42(7), 635–655. 10.1108/MF-08-2014-0211
45.
SrivastavaP. (2018). Export performance of Indian SMEs in textile sector: Role of knowledge based resources. FIIB Business Review, 5(1), 51–57. 10.1177/2455265820160107
46.
TaticchiP., TonelliF., & CagnazzoL. (2010). Performance measurement and management: A lit-erature review and a research agenda. Measuring Business Excellence, 4–18. 10.1108/13683041011027418
47.
TauringanaV., & AfrifaG. A. (2013). The relative importance of working capital management and its components to SMEs’ profitability. Journal of Small Business and Enterprise Development, 20(3), 453–469. 10.1108/JSBED-12-2011-0029
48.
ThampyA. (2010). Financing of SME firms in India: Interview with Ranjana Kumar, Former CMD, Indian Bank. IIMB Management Review, 22(3), 93–101. 10.1016/j.iimb.2010.04.011
49.
UbarhandeP., & ChandaniA. (2021). Elements of credit rating: A hybrid review and future research agenda. Cogent Business & Management, 8(1). 10.1080/23311975.2021.1878977
50.
Vivel BuaaM., Lado SestayobR., & Otero GonzalezaL. (2018). Risk determinants in the hotel sector: Risk credit in MSMEs. International Journal of Hospitality Management, 110–119. 10.1016/J.IJHM.2017.11.004
51.
WasiuzzamanS., NurdinN., AbdullahA. H., & VinayanG. (2020). Creditworthiness and access to finance: A study of SMEs in the Malaysian manufacturing industry. Management Research Review, 43(3), 293–310. 10.1108/MRR-05-2019-0221
52.
WoberK. W. (2008). Data envelopment analysis. Journal of Travel & Tourism Marketing, 91–108. 10.1300/J073v21n04_07
53.
WongA., LuW., TjosvoldD., & YangJ. (2016). Extending credit to small and medium size companies Relationships and conflict management. International Journal of Conflict Management, 27(3), 331–352. 10.1108/IJCMA-06-2015-0034
54.
World Bank. (2020, August). 25February2020, www.worldbank.org: https://www.worldbank.org/en/topic/smefinance
55.
YazdanfarD., & OhmanP. (2020). Financial distress determinants among SMEs: Empirical evidence from Sweden. Journal of Economic Studies, 47(3), 547–560. 10.1108/JES-01-2019-0030
56.
ZainudinE. F., & HashimH. A. (2016). Detecting fraudulent financial reporting using financial ratio. Journal of Financial Reporting and Accounting, 14(2), 266–278. 10.1108/JFRA-05-2015-0053
57.
ZairaniZ., & ZaimahZ. A. (2013). Difficulties in securing funding from banks: Success factors for small and medium, enterprises (SMEs). Journal of Advanced Management Science, 1(4), 354–357. 10.12720/joams.1.4.354-357
