Study Of Credit Evaluation Of Short-term Financing Bonds Based On Principal Component And Gray Relation

Since the short-term financing bonds issued, due to its low cost, high yield, itgets the favour of issuers and investors of all ages, its circulation and tradingvolume is increasing. But with the increased expansion of market scale anddistribution enterprises, how to prevent possible credit risk of short-term financingbonds has become a real problem. At present most of the short-term bond rating arevery focused on A-1level (the highest credit rating of short-term financing bonds)in our country, but the highest credit rating does not mean low risk of short-termfinancing. On the contrary, the same credit rating can’t distinguish betweendifferent underlying credit risks in asset, once the expansion of market begins, theconsequences will be disastrous. Such as an illegal lending FUXI events, LinuoGroup and Shandong Weiqiao issuance of short-term financing bonds also hascaused the stakeholders worries about their payment ability. Lehman brothersdeclared bankruptcy in the US subprime mortgage crisis, the commercial papermarket collapse rapidly. Therefore, from the fact at home and abroad, to enhancethe research of credit rating of the short-term financing bonds, to guide thereasonable flow of funds and protect the legitimate rights and interests of investorshas a very important theoretical and practical significance.This paper, based on the feature analysis of the short-term financing bonds andpredecessor’s research foundation, builds the credit evaluation index system ofshort-term financing bonds in six aspects, such as enterprise quality, raise funds,financial quality, solvency, risk level and development ability. For the researchmethods, based on combining principal component analysis and gray correlationevaluation model, this article is to evaluate210samples of short-term financingbonds. Principal component analysis is used to achieve dimension reduction ofindex variables, and according to the size of the contribution of each index, tocalculate the weight of each composite indicator for the grey correlation analysis.Gray correlation is used to evaluate credit of short-term financing bonds in order toovercome defects which may be caused by too much request and subjective factorsin others evaluation methods. According to the capital asset pricing theory, it hasproved that evaluation results of short-term financing bonds are consistent with thetheory and practice. Finally, based on the short-term credit evaluation model builtin this paper for further decision, we use the evaluation conclusions of this paper to judge preliminarily credit conditions of the new samples of short-term financing.On the hand, to test applicability of the evaluation results; On the other hand, onceagain to test short-term credit evaluation model built in this paper, and which allcan achieve satisfactory results.Therefore, credit evaluation model built in this paper and the application ofevaluation results of short-term financing bonds have provided a simple andfeasible operation for all investors and stakeholders as well as a certain referencerole for investment decision of investors and rating agencies.