Financial Drivers of SME Resilience to Economic Shocks: Empirical Evidence

Abstract

The recent economic environment, characterized by a succession of major shocks, has severely tested the financial stability of small and medium-sized enterprises (SMEs). In this context, firms’ ability to absorb disruptions and maintain financial stability (commonly referred to as resilience) has become a central concern for both policymakers and practitioners.

This paper examines the financial determinants of SME resilience to recent economic shocks using a sample of SMEs. Resilience is defined as a firm’s ability to maintain a relatively stable financial position during the shock period. An empirical approach based on logistic regression is employed to estimate the probability of resilience as a function of firms’ financial characteristics.

The results indicate that liquidity, financial structure, and profitability have a significant effect on the likelihood of SME resilience, whereas firm size appears to be less influential in the short term. These findings highlight the importance of anticipatory financial decisions in strengthening SME resilience and provide relevant managerial and economic implications.