The Study On Credit Risk Of Listed SMEs: Based On The Modified KMV Model

In this paper, we use KMV model to measure the credit risk of listed SMEs.Onthe one hand, through the comparison and analysis of empirical results, we verify theapplicability of the KMV model when use it in measure the credit risk of China’slisted companies; on the other hand, to provide empirical evidence for the poor creditrisk of SMEs, as well as financing and other issues. SMEs financing is a problemplagued the world. In fact, for those SMEs which with higher credit quality, banks andother financial institutions should provide financial support, while with the enterprisesof larger credit risk, they should pay close attention to the changes of its credit risk,and control the credit risk effectively. Therefore, to measure the credit risk of SMEs isparticularly necessary.In this paper, based on the KMV model, by adjust some parameters, weestablished a modified KMV model to measure the credit risk of listed SMEs. In orderto estimate the size of credit risk effectively, first, we set up two sets of referencesamples: that is ST company which subject to special treatment because of itsfinancial condition, and blue-chip companies because of its good operatingperformance. By comparison the credit risk of ST companies, listed SMEs and bluechip companies, to test the effectiveness and robustness of KMV model when use it tomeasure the credit risk of SMEs. Second, the difference with the previous studies isthat, this paper takes into account of the relationship between credit risk and the assetliability ratio of a enterprise.After multiple tests, empirical results show that the modified KMV model canidentify the credit risk of listed SMEs effectively. The robustness of the model wasconfirmed and the empirical results are consistent with the reality of the situation. Wefound that with the changes of listed SMEs’ default point, the forecast accuracy of themodified KMV model is stable, it is different from the KMV company,which is basedon the Western countries’ data. Overall, in the sample period, the credit of listed SMEsin China is relatively poor, default distance changes from0to0.7. Compared with thenon-ST companies and blue chip, ST’s default distance is smaller, so the ST is morelikely to default. By comparison with ST and blue chip companies, we set up a cordonof credit risk. The results show that the credit risk of listed SMEs in China isrelatively large, the default distance is very close to the ST companies. When thecompany’s default distance less than0.1, it should arouse the vigilance of a company, and take appropriate risk control measures.Our results also found that the asset liability ratio of a enterprise has a moresignificant impact on credit risk. There has a positive correlation between assetliability ratio and default distance, which is also the result obtained in this paperdifferent from the previous studies.