The Application Of The KMV Model For Credit Risk Measurement Of The Listed Companies In China

The subprime lending crisis bursting out in the USA in 2007, and the financial storm sweeping the world, make us recognize the importance of credit risk management. In order to allocate credit resources rationally and achieve the maximization of the profit, financial firms need to find out and construct the models on measurement of the credit risk corresponding to firms themselves and the market. At the same time, in order to execute the essential macro supervision and evade the financial crisis, the government needs to evaluate the different methods of risk measurement adapted by the firms, and enact the reasonable supervision policies.Theoretically, based on the basic principles of credit risk and credit risk management, the paper introduces the developmental process of the models of credit risk measurement in detail firstly. Then, though comparing and differentiating the four modern credit risk measurement, i.e. Credit Metrics Model, Credit Risk+ Model, Credit Portfolio View Model and KMV Model, the paper says that the KMV Model is fit for China's developmental practices of firms and market and revises the KMV Model necessarily.Empirically, based on the revision of the KMV Model, on the one hand, the static analysis on the 2009 data set of twenty sample companies (10 ST companies and 10 non-ST ones) shows that the revised KMV model can identify the credit risk of the companies effectively. On the other hand, the dynamic analysis on the 2006-2009 data set of two sample companies (one good and the other not good) draws the same conclusion.