The Effect of Industry Factors on the Credit Risk of Corporations-Using Hierarchical Linear Modeling

• Main Authors: Yi-Lin Shih, 施逸琳
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2006
• Online Access: http://ndltd.ncl.edu.tw/handle/71536905683157387825

碩士 === 東吳大學 === 國際貿易學系 === 94 === In the procedure of equity analysis, which is generally from top to down, we first consider the national economical factors of the equity. Second, we consider the industry to which the corporation belongs. Finally we analyze the company in order to pick up the most profitable stock to invest. In the procedure of the investment, industry factors play the vital role. Therefore, whether in risk management or in securities investment, industry factors can’t be over emphasized. While measuring credit risk, traditional accounting parameters or corporate governance factors are generally adopted to judge whether the company may go bankrupt or not. That approach analyzes the credit risk only from the individual aspect. This thesis sheds new light on the theme by using new analytical method, Hierarchical Linear Modeling(is abbreviated as HLM), to take industry factors, accounting parameters and corporate governance factors into account at the same time. We try to forecast and measure the credit risks both from the macro and micro aspect. This research surveys all listed companies of 21 industries in Taiwan. The sample period lasts eight years, from 1996 to 2003. We use HHI (Herfindahl Hirschman Index) to measure the industry’s intensity of competition. The company faces the industry’s risk when the net value lower than the face value. Moreover, following Chen(2005), we use the nine parameters in our paper. The empirical results show that industry’s risks can influence the probability of company bankruptcy. That means that the higher industry's risk is, the higher the probability of company bankruptcy is. In addition, industry's risk can, through X5 parameter (often called continuing ROE or annual industry average continuing ROE frequently), influence industry's risk, and further lead the company to bankruptcy. On the other hand, the effect of intensity of industry’s competition is not significant. This may result from the deficiency of only using HHI to measure industry competition and neglecting other financial index that might also indicate using industry's competitiveness.