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Credit Evaluation for Small and Medium-sized Enterprises by the Examination of Firm-specific Financial Ratios and Non-financial Variables: Evidence from Taiwan

Author

Listed:
  • Hsien-Chang Kuo

    (Department of Banking and Finance, National Chi-Nan University, 1, University Rd., Puli, Nantou 545 Taiwan, R.O.C.)

  • Lie-Huey Wang

    (Department of Finance, Ming Chuan University, R.O.C.)

  • Her-Jiun Sheu

    (Department of Banking and Finance/Department of Management Science, National Chi-Nan University/National Chiao-Tung University, R.O.C.)

  • Fa-Kuang Li

    (Small Business Bank of Taiwan, R.O.C.)

Abstract

A credit evaluation model for SMEs in Taiwan based on the characteristics of financial as well as non-financial data is proposed in this paper. While most financial distress prediction models use financial ratios as predictive variables, this study also integrates non-financial data as predictive variables. Kuo and Li (1999) proposed that certain firm-specific financial ratios have informational content. Moreover, the introduction of non-financial variables does enhance the model's discrimination power. The proposed credit evaluation model makes it easier to classify successful or failed SMEs.

Suggested Citation

  • Hsien-Chang Kuo & Lie-Huey Wang & Her-Jiun Sheu & Fa-Kuang Li, 2003. "Credit Evaluation for Small and Medium-sized Enterprises by the Examination of Firm-specific Financial Ratios and Non-financial Variables: Evidence from Taiwan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 5-20.
    • Handle: RePEc:wsi:rpbfmp:v:06:y:2003:i:01:n:s0219091503000980
    DOI: 10.1142/S0219091503000980
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    Citations

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    Cited by:

    1. Charlie X. Cai & Paul B. McGuinness & Qi Zhang, 2018. "Credit scores and the performance of newly-listed stocks: an exploration of the Chinese A-share market," Review of Quantitative Finance and Accounting, Springer, vol. 51(1), pages 79-111, July.
    2. Hui Hu & Milind Sathye, 2015. "Predicting Financial Distress in the Hong Kong Growth Enterprises Market from the Perspective of Financial Sustainability," Sustainability, MDPI, vol. 7(2), pages 1-15, January.
    3. Selcuk Caner & Mehmet Baha Karan, 2012. "Screening Creditworthiness of SME's: The Case of Small Business Assistance in Turkey," Multinational Finance Journal, Multinational Finance Journal, vol. 16(1-2), pages 1-20, March - J.

    More about this item

    Keywords

    Credit evaluation; Firm-specific financial ratios; Non-financial variables;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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