The Study Of Credit Risks Of The Small And Medium-sized Enterprises In The Pearl River Delta

Making loans to the small and medium-sized enterprises (SME) becomes a newprofit-earning business to the finance corporations in the Pearl River Delta Region.However, the credit risks of SMEs are usually high. Therefore, constructing aneffective credit risk measurement model is a fundamental task in this new business.This paper first introduces and compares several traditional and modern credit riskmeasurement models in the theoretical field, then reviews the evolution process of theSME in the Pearl River Delta region, and summarizes the factors which may affecttheir credit risks in the new age. The key task of this research is to propose16to-be-chosen indicators, utilize the logistic model and sample figures to construct amodel that can effectively measure the credit risk of SME in the Pearl River Deltaregion, considering factors of regional economics, industrial growth, and companyfinance. The result of this model shows that the annual region GDP growth, the annualvalue-added growth of the sector, and the return on equity, the ratio of profits to cost,current ratio, and the growth rate of the net asset of the enterprise are five selectedvariables of the model equation. With high accuracy, this model goes through the testsof goodness of fit and out-of-sample.This paper also proposes some recommendations to optimize the credit riskmanagement of finance corporations. It suggests finance corporations should monitorthe risks of different dimensions, including the performance of the SME, theeconomic growth of the region and the sector, select suitable models, and strengthenthe measurement of the default risk of SME.