Econometric modeling of financial risks and credit space of small and medium-size mining businesses

In current conditions of high volatility of the global commodity markets, increasing uncertainty and stricter requirements for financial stability of companies, the task of assessing the financial risks and credit space of small and mediumsize companies operating in the mining industry is becoming particularly relevant. The article is dedicated to an empirical study of the financial risk factors and credit space of small and medium-size mining businesses. The study formed a dedicated industry sampling of 9,901 companies and applied a comprehensive econometric approach that takes into account statistical financial indicators and dynamic changes in revenues, assets and profits. The purpose of the study is to identify the most significant balance sheet, operational and dynamic factors that determine the level of financial risks and the probability of the company’s shifting into the high-risk category. The results show that negative equity remains the dominant risk factor for the small and medium-size mining businesses: in the basic financial risk index model their coefficient is 38.816 points, and in the high-risk logit model, the odds ratio is 15.561. The dynamic variables have a more accurate interpretation, i.e. in the working capital model the revenue growth is associated with an increase in the financial risk index, whereas the profit growth statistically reduces the risks. This means that it is not the expansion itself that is important for mining companies, but the quality of the growth, as the sales growth without profitability and payment margin can be accompanied by an increased financial stress.