Constructing a Procedure to Evaluate Credit Risks Due to Defaults for Small and Medium-sized Enterprises

• Main Authors: Li-An Wu, 吳莉安
• Other Authors: Lee-Ing Tong
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/17520197230854549611

碩士 === 國立交通大學 === 工業工程與管理系所 === 94 === Economic recession and unstable financial markets have resulted in some companies not being able to make on-time payment on their mortgage loans. This in turn has resulted in high overdue loan and low recovery rates to banks and financial institutions where consequently result in huge financial losses to these loan agencies. To meet the requirements from the New Basel Capital Accord (Basel II) and to minimize the credit risks due to incorrect loan decisions, it is very important for banks and financial institutions to construct a reliable procedure to evaluate credit risks resulting from defaults. Most of the studies on loss due to defaults (or recovery rate) are based on the data drawn from publicly traded companies. However, there is some difficulty to apply these results directly to those loan agencies whose customers are mainly small and medium-sized enterprises (SMEs). This research, focused on small and medium enterprises specifically, aims to construct an effective and reasonable procedure to assist loan agencies to evaluate credit risks due to default. The procedure consists of four stages: (1) selecting relevant variables and collecting data, (2) using Principle Component Analysis to reduce the number of variables, (3) applying Logistic regression to construct credit risk models, (4) constructing recovery rate prediction models to assist financial institutions making loan recovery policy. Finally, a case study is provided to demonstrate the effectiveness of the proposed procedure.