Discriminant Financial Indicators Of Corporate Defaults

As the credit risk is more and more important to government and financial institute, credit risk measurement has been the core of research on risk management. And then as the key and start of credit risk measurement, the probability of default has been paid special attention to. Different industries has different risk characteristics, so the predictive financial ratio maybe different between different industries. So, this paper seeks for the financial ratios which can predict the default of enterprise in the point of inter-industry differences, and put emphases on the differences of discriminant financial ratios of enterprises' default between different industries.This paper analyses the reasons of inter-industry risk differences and the characters of industry-special risk firstly and finds that there is great differences between different industries, and we should pay attention to the effect of inter-industry differences when seeking for financial ratios of predicting enterprises' default.Then, using the data of enterprises coming into the markets, this paper tests the differences between industry-special's predictive financial ratios. Firstly, this paper finds a proper method to select the default samples and the good samples. Secondly, we select out the 27 most important financial ratios to enterprises' default from the initial financial ratios, and then, this paper uses the factor analysis to reduce the pertinence of the 27 financial ratios, and gets 9 factors at last. Then, all-industry discriminant model and industry-special discriminant models are founded using the 9 factors and Logistic regression analysis.After analyzing the differences of parameters in industry-special discriminant models, this paper finds that the discriminant financial ratios do differ between industries and the differences can be explained by the characteristics of every industry. Then, this paper check the predict power of these dicriminant power and finds that the financial ratios in every industry has good predict power and the predict power of financial ratios in computer industry is better than that in all-industry disciminant model. At last, this paper get the results of the research: Inter-industry differences do exist and they are the result of the differences of industry characteristics;so industry-special default discriminant models can find out the most predictive financial ratios and have better predictive power.