Development of the Model for the Creditworthiness Analysis in Russian Metallurgy

2 Pages Posted: 23 Jun 2020

See all articles by Dmitry Doroshevskiy

Dmitry Doroshevskiy

affiliation not provided to SSRN

Elizaveta Markovskaya

National Research University Higher School of Economics

Date Written: May 30, 2020

Abstract

To minimize credit risks, banks must first analyze the financial condition of a potential borrower and evaluate their creditworthiness. The technique used for this purposes should be comprehensive, accurate and reliable. However, criticism of existing approaches to assessing creditworthiness is often associated with their lack of flexibility and absence of industry-specific approach.

The metallurgical industry is very important for the Russian economy. Many organizations operating in related industries consume the metallurgical production, and the products themselves have a significant share in national exports. Russian metallurgical organizations are leaders not only in the domestic, but also in the global market.

The concepts of credit risk, insolvency and creditworthiness were studied. The milestones of assessing the creditworthiness of organizations were considered, the evolution of approaches to valuation was presented during the second half of the last century and to the present moment. A brief overview of existing banking practices is provided.

The financial performance of Russian metallurgic enterprises were analyzed. Particular attention is paid to the review of industry leaders as examples of the most sustainable organizations. Based on the reporting data, the characteristics of financial indicators and capital structure inherent in the industry were identified.

The process of creating the methodology for assessing creditworthiness, which would take into account the characteristics of metallurgical organizations, is presented. A compilation of financial ratios for analysis was selected, the probability of bankruptcy was estimated for each company in the sample. Based on panel data on 35 companies for 2014-2018, through using a logistic regression, a scoring model was built to assess the creditworthiness of metallurgical organizations.
The result of the work was an express methodology that allows to assess the creditworthiness of a metallurgical organization quickly and transparently, and at the same time, with sufficient accuracy, taking into account industry specifics.

Keywords: creditworthiness analysis, Russian metallurgy

JEL Classification: G32

Suggested Citation

Doroshevskiy, Dmitry and Markovskaya, Elizaveta, Development of the Model for the Creditworthiness Analysis in Russian Metallurgy (May 30, 2020). Available at SSRN: https://ssrn.com/abstract=3614190 or http://dx.doi.org/10.2139/ssrn.3614190

Dmitry Doroshevskiy (Contact Author)

affiliation not provided to SSRN

Elizaveta Markovskaya

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

HOME PAGE: http://www.hse.ru

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
9
Abstract Views
130
PlumX Metrics