An Empirical Study Of Listed Firms’ Default Risk And Related Factors

This paper studies the listed companies’ default risk measurement problems and therelationship between corporate default risk and factors from macro and micro world. Thepaper compares the differences between the popular structural model and reduced-formmodel and other statistical model, and argues the possibility of logit model to measurethe discrete-time individual’ default risk. According to the special situation of China, thepaper treats the labeled "special treatment" by Securities Regulatory Commission as amark into default risk. Using a panel data set including51A-Share listed companies over2005-2011, a period experiencing a full-scale boom-crisis-recession-recovery process, Iobtain the default risk formula based on logistic function by running a logit modelprogram. The panel data set includes firm-specific variables and trading-market variablesand macroeconomic variables.With the new kinds of variables and time-series estimation method, I find that logitprogram approach can not predict firm’s failure or not exactly with an absolute defaultpossibility, but can give a dynamic trend of firm’s credit risk. Empirical results show thatfirm-specific factors make up less and gentler influence in default risk than factors frommacro and trading market. In a word, firm-specific factors are useful in firms’ creditranking since firms are under a same macro condition, but that macroeconomic andtrading-market factors are necessary to measure the firm’s total default risk level.