Probability of Efficiency: Statistical Implications That Lead Firms to Achieve a Minimal and Sufficient “Return-On-Investment”

Abstract

After clarifying the relationship between Return-On-Investment (ROI) and the possibility of default, the research sets a minimum level of this ratio, which can generally be assigned to an efficient and healthy firm. From this step we start to comprehend which are the economic and financial variables that owned the firms, three years before, reaching that minimum level of ROI. With logistics methodology and a large sample of 5,388 Italian SMEs, a rating model may be built to predict the probability of efficiency and will be studied accounting variables that lead a firm with more possibilities to be "prospective efficient". Results support the view of the importance of capital structure and operating profitability ratios.