A Research On The Applicability Of Z-Score Model In The Credit Rating Of Listed Companies

The integrity of listed companies has great effect on interests of investors and on the stability of market in our country’s stock market. But the lack of credit of our listed companies is obvious, which stops stock market from growing up. so the credit rating of listed companies is important. Credit rating can reveal all kinds of credit risks in market, improve the understanding of risks to investors and provide evidence for pricing of financial instruments. According to developed countries’ experience, sufficient and high quality credit information can make investment and financing more effective and promote capital market. On another hand, with the complete of reform, more and more listed companies can improve their governance structure and internal control mechanism, the results of improving also needs assessing from rating agencies. But sub-prime crisis in 2008 has continuous bad effect on global major economies. In the crisis, S & P and Moody’s haven’t given correct credit assessment to large financial institutions like Goldman Sachs and Merrill Lynch, so the effectiveness and credibility of credit rating suffered an unprecedented challenge. So we can see the importance of a correct and effect credit rating. Credit rating industry in our country has been developing for several decades, but according to rating method the rating exist problems.Based on this, the research pays attention to Z-score model’s use to listed companies’ rating by using the methods of comparing and empirical. The research conducts credit rating to parts of listed companies in Jiangsu on the basis of deep analysis of credit risk measure model and compares to actual internal rating of Agricultural bank of China, from which we can analyze the final results and the differences. Then, according to the features and environment of listed companies in China, the research summaries the advantages and disadvantages of the use of Z-score model to listed companies" credit rating in our country and proposes corresponding countermeasures and suggestions for improving listed companies’ risk management.In the structure arrangements, the first part is about summary of domestic and abroad researches, including related literature review of rating of listed companies and credit rating methods, research objectives, methods, content and framework are also included. The second part is about status of credit rating, more attention is paid to the use of credit rating methods and the set of credit rating in foreign countries and more focus is paid to existing problems and reasons of listed companies in our country. The third part is about the choosing of Z-score model according to our country’s companies’actual situation and the analysis of applicability of Z-score model. The forth part is about the empirical research of Z-score model taking listed companies in Jiangsu as an example. The fifth part is about the use of adjusted Z-score model in listed companies according to the examples provided by Agricultural Bank of China. The last part is the summary.