The Study On The Correlation Between Credit Risk And Corporate Governance For Listed Companies In Sme Board

Credit risk is the main source of liquidity crisis for enterprises of all types, and may contribute to regional or even global financial crisis fundamentally. Regardless of the economic system and mechanism, the credit problems are just there and the research of credit risk is of general practical and theoretical significance.A series of credit events in the capital market not only illustrates the seriousness of credit risk, and symbolizes the major significance of corporate governance to credit risk. Based on the elaboration of fundamental theories of sound corporate governance and credit risk, this thesis analyzes the mechanism how corporate governance influence credit risk. In fact, sound corporate governance structure not only ensures the effectiveness of credit risk management in terms of system and organization, but also reduces the probability of default through the increase of financial strength and the enhancement of credit awareness. More importantly, good corporate governance may mitigate the information asymmetry between companies in debt and creditors reduce the risk of adverse selection and moral hazard, thus fundamentally reduce credit risk. Therefore, the establishment of a sound corporate governance structure can effectively improve the level of credit risk management.In this thesis,2007-2009 data of 102 listed companies in the SME board are used in the sample to calculate the DD (Distance to Default) by KMV model, and depict the level and characteristics of credit risk. Then, bulk sample and grouped regression models, Independent-Sample T test are used to test and explore the correlation between corporate governance and credit risk, and discuss the difference between different types of enterprises in the relation. Combined with the current literature review and the situation in China, DD is chosen as the proxy variable for credit risk, and the overall corporate governance structure encompasses the ownership structure, board governance, management control, information disclosure and so on. Besides, the financial index that reflect size, profitability, solvency and growing capability are set as controlling variables. The regression of bulk samples show that for largest shareholders with relative controlling, the higher ownership percentage leads to lower credit risk, while for absolutely controlling and no controlling, the relation is reversed. Institutional investors play a growing important and its presence can reduce credit risk. Association between credit risk and board size is not significant, but a higher proportion of independent directors in board is helpful to reduce the company's credit risk. Information disclosure with higher standards will reduce the credit risk. As high-tech enterprises are characterized with high-growth and high-risk, they differ from non-high-tech in the relation between corporate governance and credit risks. Finally, we construct the corporate governance based credit-risk management framework and propose risk management strategies.