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

Hsien-Chang Kuo (), Lie-Huey Wang, Her-Jiun Sheu and Fa-Kuang Li
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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.

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2003, vol. 06, issue 01, 5-20

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.

Keywords: Credit evaluation; Firm-specific financial ratios; Non-financial variables (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (3)

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DOI: 10.1142/S0219091503000980

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