The Empirical Analysis On Credit Risk Of Listed Companies In China

This paper is an applied study on measuring public companies credit risk by KMVMODEL. KMV MODEL is the method of calculation for expected loss given defaultwhich was developed by KMV Company, which calculated basing on classic MERTONSTRUCTURE MODEL and combining with BLACK-SCHOLES standard European shareoption price and company finance report as well. KMV MODEL could straightlyembody company credit status, and could be used into different companies’comparison; it is applied extensively into credit rating of public companies who havemarket price information.In1990s, Mexico Crisis, European Crisis and Asian Finance Crisis broughttremendous effect and cause huge lost into world economy. Entering into the21stcentury, with financial industry development and financial derivative product update,there broke American subprime crisis globally which last till now and doesn’t recovertotally yet. In global risk time there is no country could escape, which pushworldwide financial industry attach high importance to financial risk especially to thecredit risk management. In the western world, credit risk management importance isfocused on all the time, after several decade years development, the foreign creditrisk theory has been deepened from traditional quality analysis to modern analysison quantity, in order to ensure the credit level measurement more accurately andforecast company future credit ability more flexibly, so as to set up credit earlywarning mechanism and management system, to deduct the possible loss of risk.This paper mainly study from financial institution credit risk managementperspective, basing on KMV credit risk measurement model, illustrating with thesample of the market and accounting information of the first tine breaching publiccompanies from2010to2012, using short term debt ratio to total indebtedness,short term ratio to company Book Assets and Debt-To-Assets ratio to be thresholdvariable in turn, and revise KMV MODEL breaching points by threshold regressionmethod, to improve the model and measure credit risk of Chinese public companiesaccurately. This paper study KMV MODEL by evidence from the public companies with70%above Debt-To-Assets ratio and70%above short term ratio to the total indebtedness,outcome to conclude that it best both from effect and classification to useDebt-To-Assets ratio to be threshold variable. Through fitting new breachingequation, the outcome expected breaching ratio is better than the effect fromtraditional KMV MODEL calculation, make it breaching ratio more instructive.