This paper utilizes empirical data from Chinese A-share market and tests the discriminating power of the KMV model in China. The analysis result demonstrates that the KMV model has certain discriminating power but the power is limited and weak. Defining special treatment (ST) companies as defaulters and choosing short time span after non-circulated shares reform may affect our results. Directly using the model in China without any modifications also limits the model's performance. However, the essential reason lies in the relatively poor efficient level of Chinese stock market. |