Research On Credit Risk Of Chinese Listed Companies Based On KMV Model

Nowadays credit risk is one of the main financial risks in the world. Credit risk can both influnences financial corporations and other various aspects of economy and society. With the fast development of financial industry,some foreign banks and other institutions has established a series of models to measure the cridit risk. There is a trend that the measurement of credit risk has developed from qualitative analysis to quantitative analysis.In China,because of the low level of risk management,credit risk has been a great obstacle to the fast and healthy development of China's economy. We have always used the qualitative method to measure the cerdit risk of the firms in the past. But as we know,the traditional qualitative credit risk measurements are more subjective and lagging. So buliding a more appropriate credit risk measurement model in the persent condition of China is very important.The credit lack of Chinese listed companies brought enormous negative impact to the economy development. The lack of appropriate credit risk measurement is a big problem to the credit risk management in China. By learning international advanced credit risk management techniques,we want to establish a suitable credit risk measurement model in China.This paper combines the qualitative and quantitative methods to find out the most suitable method of Chinese listed companies'credit risk management. First,we introduce the conception of the credit fisk of our country'listed firms,and state the importance of the credit measurement in the credit risk management. Based on analying and comparing several mainstream credit risk measurement models used in the developed countries,this paper chooses KMV model which is more suitable to the situation of China to measure the credit risk of domestic listed companies.Then we illustrate the theoretical basis and the framwork of the KMV model—the Merton model,and point out some problems of the model in the practice. Based on the KMV moedl, we select 42 listed firms, use their stock price and other financial information to measure their credit risk.With the empirical results,we find out that the KMV model can effectively identify the credit risk of the listed companies. It can be used in the credit risk management of the domestic listed firms,but we also must improve the model to make it more adapt to Chinese situation.