| Summary: | 碩士 === 逢甲大學 === 會計與財稅所 === 93 === A traditional credit rating methodologies is based on information elucidated from financial statements, which are prepared to subject to the Generally Accepted Accounting Principles (GAAP). Due to various assumptions and limitations, financial information underlying on the GAAP may not be able to reflect the real economy and real worth of an enterprise fully. It is needed to adopt alternative method on credit rating.
Economic Value Added (EVA) developed by Stern Stewart & Co. has been used wildly as an effective tool for measuring financial performance and allocation of resources to create value for shareholders. EVA claims a general idea of cash flows and includes completely capital cost. It may be a robust index on business credit rating. Applying EVA on business credit rating is the purpose of this study. The questions of this study include: (1) Is there a significant relationship existing between EVA and credit rating? (2) Is the existing relationship a linear relation?
An empirical data of Taiwan''s stock market (except banking, insurance business) was obtained from Taiwan Economic Journal (TEJ) database. The financial data used for analysis amounted to 291 samples (companies) from 1995 to 2003. Firstly, EVA for each sample companies was counted, and adjusted, by divided by average capital, to an Standardized Economic Value Added (STDEVA). Secondly, Taiwan Credit Rating Index (TCRI), from TEJ databank, was converted. The smaller number will represent a worse condition to accompany with the SEDEVA. Some correlation analysis, regressions, and T-test were conducted.
For keeping off effects of economic conditions, all statistical analyses were conducted under three condition: Taiwan''s economic boom (from 1995 to 1997) , economic recession (from 2000 to 2002) and a moving average of 3 years. Following results were acquired:
1. Under the economic condition, both of prosperity and depression, there are statistically significant relationship between STDEVA and TCRI existing.
2. Under the economic condition, both of prosperity and depression, there are statistically significant linear relationship between STDEVA and TCRI existing.
3. For companies with worse credit rating tend to have worse EAV in the prior three years among the sample companies.
There are two recommendations in this study:
1. EVA can be used to facilitate credit rating, especially for banks to treat enterprises loan case.
2. For most company not include in TCRI system, EVA is a good rating index for measuring their credit.
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