The Effects Of Non-financial Factors On Enterprise Credit Ratings

With the release of the new Basel II, while the level of risk management of China's banking industry has made a higher demand, the existing credit rating model mainly depended on financial data for forecasting corporate default rate, as to how to improve credit predictive power of rating models has become a common concern.Berger et al (2002) and scholars through the study found that when the credit rating of enterprises are proceeded, financial factors and non-financial factors should be taken into consideration, it can more accurately predict corporate default rates. Foreign banks have already paid more a attention to non-financial indicators in the rating model. However, the credit rating of Chinese commercial banks to consider non-financial indicators, and quantification of non-financial indicators still questioned.Empirical studies of firm characteristics factors of quality, reasonable ownership structure, and corporate market position of these three non-financial indicators of the impact on the corporate credit rating. In this study, construction, tourism, retail, manufacturing, tourism are selected, financial and non-financial factors as variables, and using KMV default prediction model as a tool. Then this model's reliability and validity analysis are based on the assumption. After all scales can serve as an effective measurement tool, the study also described the data statistical analysis, found the data was representative to represent the overall objective. Therefore, this paper use spss as a tool of correlation and regression analysis, non-financial indicators and the role of credit rating mechanism between an analysis and explanation, and to scholars with related research on methods of credit rating models, and build a non-financial factors and corporate credit rating of the theoretical model, this characteristic elements from the company, ownership structure, business status of the three angles market analysis, hypotheses and empirical analysis on these hypotheses and discussions have finally come to the following conclusions:(1) The company features the quality and the expected default frequency factor was negatively correlated.Ability to represent the company's credit solvency of enterprises, and will, therefore the higher the credit capacity, greater ability to finance enterprises in the industry will accelerate the development of the enterprise are bound to expand the scale, the paper analyzes the data, the company characteristic factors and expected a negative correlation between default rates, which to some extent, shows characteristics of factors affecting the company's credit business. And the data analysis, the company characteristic factors impact on the credit ratings of some more.(2) Reasonable ownership structure and expected default frequency was negatively correlated.Obtained by the analysis of the text, ownership structure and a negative correlation between default rates, but no company characteristic factors impact on the expected default frequency of large, but to some extent influence the corporate credit ratings to the banks on a credit rating company O'clock This indicator should be considered.(3) the status of the enterprise market with the expected default rates negatively correlated.Regression analysis between the factors, we can see that the market position of enterprises the greatest impact on credit ratings but also the most obvious. This explains the status of industry changes through affecting the profitability of enterprises and then affect the credit rating, and company size to some extent affect the structure of assets and liabilities.This conclusion has practical significance as follows:(1) In order to avoid bad debt bad debt situation, and in the enterprise credit rating loans, commercial banks shall strengthen the consideration of non-financial indicators, financial indicators of enterprises and non-financial indicators of these two aspects of comprehensive consideration.With the release of the new Basel II, China's commercial banks must follow the requirements of the new agreement, the effectiveness of the internal rating of higher demand. In this paper, the data of listed companies'selected empirical study on non-financial indicators were selected and quantified, and to verify a company characteristic factor, ownership structure, market position and business credit rating of the enterprise. From this study found that China's commercial banks to make loans to enterprises to improve decision-making considerations on non-financial indicators, attention to the soft factors on the corporate credit rating of.(2) Enterprises are to occupy position in the industry, leading to their own businesses competitive, not only to be considered in the development of enterprise in the development of internal policies, but also pay attention to the external environment in which, as far as possible the two coordinated development aspects.Rapid economic development today, companies want to be raised based on the competitiveness of enterprises, the reasonable control of company size, so that enterprises achieve the most optimal resource allocation, we must make reasonable the ownership structure, while also concerned about the business contribution to society, attention to the legitimacy of business transactions project, which not only affect enterprise performance, enterprise status in the industry, is a business enterprise can become the basis for Evergreen, but also affect the bank's overall credit rating of enterprises, but also affected business financing ability, is not conducive to expansion of business scale, the improvement of the competitiveness of enterprises. Therefore, the enterprises are to long-term development of an invincible position in the competition, to non-financial indicators and financial indicators into consideration, be hard and soft side.Verified the assumption, based on in-depth study of this paper are to be strengthened, made follow-up recommendations of the study are as follows:First, the paper uses empirical research KMV model to the data used by the company 2005-2009 - years of data, if the reduced time as a scale, use half a year or quarterly data, the results may be of some stability. As the database construction in China has yet to be perfect, and KMV model requires the support of at least five years of data, so that further studies need to be in the future.Second, this paper research firm characteristic factors, ownership structure, market position of enterprises on the validity of credit ratings, but these indicators of how the role of financial indicators did not study.Finally, this article only considerate listed companies, but more and more attention are attracted by SMEs in the current development situation,, while the SMEs operate with more flexibility and risk resistance are weak, non-financial factors much more affect SMEs, so small and medium enterprises will be a future research direction.