A multicriteria approach for modeling small enterprise credit rating: Evidence from China

Journal article


Chai, Nana, Wu, Bi, Shi, Baofeng and YANG, WEIWEI 2019. A multicriteria approach for modeling small enterprise credit rating: Evidence from China. Emerging Market Finance and Trade. https://doi.org/10.1080/1540496X.2019.1577237
AuthorsChai, Nana, Wu, Bi, Shi, Baofeng and YANG, WEIWEI
Abstract

As the engine of China’s economy, small enterprises have been the central to the country’s economic development. However, given the characteristics of the small enterprises loan (i.e., short borrowing period, large volume, small amount and incomplete information), it is extremely challenging for financial institutions to assess their creditworthiness. Thus, it seriously delays and restricts the financing access for small enterprises. In an attempt to relieve the financing difficulty of small enterprises, this article makes use of 687 small wholesale and retail enterprises in a regional commercial bank in China, to establish a credit rating indicator system composed of 17 indicators by using both partial correlation analysis and probit regression. It then utilizes TOPSIS together with fuzzy C-means to score the credit ratings of our sample of small enterprises. With the dual test of default discrimination and ROC curve, the prediction accuracy of the established indicator system has reached 80.10% and 0.917, respectively, indicating the robustness and validity of our credit rating system.

KeywordsFinance; credit rating; default risk; fuzzy c-means
Year2019
JournalEmerging Market Finance and Trade
Emerging Markets Finance and Trade
PublisherTaylor & Francis
ISSN1540496X
15580938
Digital Object Identifier (DOI)https://doi.org/10.1080/1540496X.2019.1577237
Web address (URL)http://hdl.handle.net/10545/623724
hdl:10545/623724
Publication dates27 Feb 2019
Publication process dates
Deposited29 Apr 2019, 07:29
Accepted27 Jan 2019
Contributorsuniversity of derby
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