This research relies on a definition of default distinct from what is usually accepted in
literature examining failed firms. In this study, default is a situation of temporary financial
distress not strong enough to bankrupt a firm or to generate substandard loans and bad debts.
The classification of firm as sound or in financial distress has been determined by cluster
analysis carried out on a ratio set computed using information from both banks internal records
and the Italian Central Credit Registry. The logistic regression analysis is employed to obtain
the final model