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Research on Credit Risk Assessment of Commercial Banks Based on KMV Model

Received: 12 August 2021     Accepted: 6 September 2021     Published: 10 September 2021
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Abstract

Under the background of the new normal economy, the financing mode of local governments has changed, which has led to the emergence of a new pattern in China's financing market. Under this background, banks are facing the development pressure of subject diversification, financial disintermediation and cross-border competition. Commercial banks also actively promote the compliance development of emerging businesses such as financial market through the "comprehensive direction", so as to form a balanced and complementary development situation with traditional credit business. Therefore, this paper taking credit risk and related theories as the starting point, KMV model is selected to study domestic bank risk monitoring. Then, China Merchants Bank is taken as the research object, Shengjing Bank, Harbin Bank, Qingdao Bank and Chongqing Bank are taken as horizontal comparison. The data sampling time span is January to December 2018, as vertical comparison. Five banks were evaluated for credit risk, and it was found that the default distance of China Merchants Bank was relatively small and the default probability was relatively large. However, according to the calculation and analysis of KMV model, the default probability and return volatility of China Merchants Bank rank first among the five commercial banks, but at the same time, it maintains a high net profit margin of 129.3% in 2018, which shows that China Merchants Bank has a strong ability to control credit risk.

Published in Social Sciences (Volume 10, Issue 5)
DOI 10.11648/j.ss.20211005.11
Page(s) 204-217
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

Internet Finance, Commercial Banks, Total Factor Productivity, Malmquist Index, Pool Data

References
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  • APA Style

    Yan Bingzheng, Bai Puxian. (2021). Research on Credit Risk Assessment of Commercial Banks Based on KMV Model. Social Sciences, 10(5), 204-217. https://doi.org/10.11648/j.ss.20211005.11

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    ACS Style

    Yan Bingzheng; Bai Puxian. Research on Credit Risk Assessment of Commercial Banks Based on KMV Model. Soc. Sci. 2021, 10(5), 204-217. doi: 10.11648/j.ss.20211005.11

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    AMA Style

    Yan Bingzheng, Bai Puxian. Research on Credit Risk Assessment of Commercial Banks Based on KMV Model. Soc Sci. 2021;10(5):204-217. doi: 10.11648/j.ss.20211005.11

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  • @article{10.11648/j.ss.20211005.11,
      author = {Yan Bingzheng and Bai Puxian},
      title = {Research on Credit Risk Assessment of Commercial Banks Based on KMV Model},
      journal = {Social Sciences},
      volume = {10},
      number = {5},
      pages = {204-217},
      doi = {10.11648/j.ss.20211005.11},
      url = {https://doi.org/10.11648/j.ss.20211005.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ss.20211005.11},
      abstract = {Under the background of the new normal economy, the financing mode of local governments has changed, which has led to the emergence of a new pattern in China's financing market. Under this background, banks are facing the development pressure of subject diversification, financial disintermediation and cross-border competition. Commercial banks also actively promote the compliance development of emerging businesses such as financial market through the "comprehensive direction", so as to form a balanced and complementary development situation with traditional credit business. Therefore, this paper taking credit risk and related theories as the starting point, KMV model is selected to study domestic bank risk monitoring. Then, China Merchants Bank is taken as the research object, Shengjing Bank, Harbin Bank, Qingdao Bank and Chongqing Bank are taken as horizontal comparison. The data sampling time span is January to December 2018, as vertical comparison. Five banks were evaluated for credit risk, and it was found that the default distance of China Merchants Bank was relatively small and the default probability was relatively large. However, according to the calculation and analysis of KMV model, the default probability and return volatility of China Merchants Bank rank first among the five commercial banks, but at the same time, it maintains a high net profit margin of 129.3% in 2018, which shows that China Merchants Bank has a strong ability to control credit risk.},
     year = {2021}
    }
    

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  • TY  - JOUR
    T1  - Research on Credit Risk Assessment of Commercial Banks Based on KMV Model
    AU  - Yan Bingzheng
    AU  - Bai Puxian
    Y1  - 2021/09/10
    PY  - 2021
    N1  - https://doi.org/10.11648/j.ss.20211005.11
    DO  - 10.11648/j.ss.20211005.11
    T2  - Social Sciences
    JF  - Social Sciences
    JO  - Social Sciences
    SP  - 204
    EP  - 217
    PB  - Science Publishing Group
    SN  - 2326-988X
    UR  - https://doi.org/10.11648/j.ss.20211005.11
    AB  - Under the background of the new normal economy, the financing mode of local governments has changed, which has led to the emergence of a new pattern in China's financing market. Under this background, banks are facing the development pressure of subject diversification, financial disintermediation and cross-border competition. Commercial banks also actively promote the compliance development of emerging businesses such as financial market through the "comprehensive direction", so as to form a balanced and complementary development situation with traditional credit business. Therefore, this paper taking credit risk and related theories as the starting point, KMV model is selected to study domestic bank risk monitoring. Then, China Merchants Bank is taken as the research object, Shengjing Bank, Harbin Bank, Qingdao Bank and Chongqing Bank are taken as horizontal comparison. The data sampling time span is January to December 2018, as vertical comparison. Five banks were evaluated for credit risk, and it was found that the default distance of China Merchants Bank was relatively small and the default probability was relatively large. However, according to the calculation and analysis of KMV model, the default probability and return volatility of China Merchants Bank rank first among the five commercial banks, but at the same time, it maintains a high net profit margin of 129.3% in 2018, which shows that China Merchants Bank has a strong ability to control credit risk.
    VL  - 10
    IS  - 5
    ER  - 

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Author Information
  • College of Professional Study, Northeastern University, Boston, United States

  • School of Business, University of Sydney, Sydney, Australia

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