IDEAS home Printed from https://ideas.repec.org/a/wsi/ijitdm/v11y2012i06ns0219622012500332.html
   My bibliography  Save this article

Alternative Method For Determining Industrial Bond Ratings: Theory And Empirical Evidence

Author

Listed:
  • LIE-JANE KAO

    (Department of Business and Entrepreneurial Management, Kainan University, Taoyuan, Taiwan)

  • CHENG-FEW LEE

    (Department of Finance & Economics, Rutgers University, NJ, USA;
    Department of Finance and Banking, Kainan University, Taoyuan, Taiwan)

Abstract

The financial-ratio-based credit-scoring model for bond rating system requires the maximization of two conflicting objectives (i.e., the explanatory and discriminatory power, simultaneously), which had not been directly addressed in literature. The main purpose of this study is to develop a hybrid multivariate credit-scoring model that combines the principle component analysis and Fisher's discriminant analysis using the MINIMAX goal programming technique so that the maximization of the two conflicting objectives can be compromised. The performance of alternative credit-scoring models is analyzed and compared using dataset from previous studies. We find that the proposed hybrid credit-scoring model outperforms other alternative models in both explanatory and discriminatory powers.

Suggested Citation

  • Lie-Jane Kao & Cheng-Few Lee, 2012. "Alternative Method For Determining Industrial Bond Ratings: Theory And Empirical Evidence," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 11(06), pages 1215-1235.
    • Handle: RePEc:wsi:ijitdm:v:11:y:2012:i:06:n:s0219622012500332
    DOI: 10.1142/S0219622012500332
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219622012500332
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219622012500332?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cheng Few Lee, 2020. "Financial econometrics, mathematics, statistics, and financial technology: an overall view," Review of Quantitative Finance and Accounting, Springer, vol. 54(4), pages 1529-1578, May.

    More about this item

    Keywords

    Explanatory power; discriminatory power; credit-scoring model; MINIMAX goal programming; 62H25; 62H30; 90C29; 90A09;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijitdm:v:11:y:2012:i:06:n:s0219622012500332. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijitdm/ijitdm.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.