• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.15 no.2
• /
• pp.1118-1125
• /
• 2014

The past IMF foreign exchange crisis and subprime financial crisis had a big influence on variability of macroeconomics, even if the origin of its occurrence might be different. This not only had a significant infrequence on the overall industries, but also produced many insolvent companies by being closely linked with a management environment of an individual construction company leading the construction industry. The purpose of this research is to investigate characteristics of management condition of construction company according to the size of construction company using KMV model developed on the basis of the Black & Scholes option pricing theory. This research has set 28 construction companies listed to KOSPI/KOSDAQ for applying the KMV model and measuring the level of the default risk of construction companies. The data was retrieved from TS2000 established by Korea Listed Companies Association (KLCA), Statistics Korea. The analysis period is between first quarter of 2004 and fourth quarter of 2010. This research examine characteristics of the level and fluctuation process of the management condition of construction company according to the size of construction company.

• Korean Journal of Construction Engineering and Management
• /
• v.17 no.5
• /
• pp.13-21
• /
• 2016

Insolvency of construction companies that play the role of main contractors can lead to clients' losses due to non-fulfillment of construction contracts, and it can have negative effects on the financial soundness of construction companies and suppliers. The construction industry has the cash flow financial characteristic of receiving a project and getting payment based on the progress of the construction. As such, insolvency during project progress can lead to financial losses, which is why the prediction of construction companies is so important. The prediction of insolvency of Korean construction companies are often made through the KMV model from the KMV (Kealhofer McQuown and Vasicek) Company developed in the U.S. during the early 90s, but this model is insufficient in predicting construction companies because it was developed based on credit risk assessment of general companies and banks. In addition, the predictive performance of KMV value's insolvency probability is continuously being questioned due to lack of number of analyzed companies and data. Therefore, in order to resolve such issues, the Bayesian Probabilistic Approach is to be combined with the existing insolvency predictive probability model. This is because if the Prior Probability of Bayesian statistics can be appropriately predicted, reliable Posterior Probability can be predicted through ensured conditionality on the evidence despite the lack of data. Thus, this study is to measure the Expected Default Frequency (EDF) by utilizing the Bayesian Probabilistic Approach with the existing insolvency predictive probability model and predict the accuracy by comparing the result with the EDF of the existing model.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.17 no.8
• /
• pp.147-156
• /
• 2016

This study analyzed the impact of changes in the construction business on construction company insolvency according to their size using the vector error correction model. First, this study applied EDF (Expected Default Frequency), which was calculated by KMV (Kealhofer, McQuown and Vasicek) model, as a variable to indicate the insolvency of construction companies. This study set 30 construction companies listed to KOSPI/KOSDAQ for estimating the EDF by size and construction companies were divided into two groups according to their size. To examine the construction business cycles, the amount of construction orders according to the type-residential, non-residential, and civil work- was used as a variable. The serial data was retrieved from TS2000 established by the Korea Listed Companies Association (KLCA), Statistics Korea. The analysis period was between the second quarter of 2001 and fourth quarter of 2015. As a result of calculating the EDF of construction companies by size, as it is generally known, the large-sized construction companies showed lower levels of insolvency than relatively smaller-sized construction companies. On the other hand, impulse response analysis based on VECM confirmed that the level of insolvency of large-scaled companies is more sensitive to business fluctuations than relatively smaller-sized construction companies, particularly changes in the residential construction market. Hence it is a major factor affecting the changes in insolvency of large-sized construction companies.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.15 no.5
• /
• pp.3260-3269
• /
• 2014

The construction industry has strong ties with other industries, and so construction company insolvency also has a strong influence on other industries. Prediction models addressing the insolvency of construction company have been well studied. Although factors contributing to insolvency must precede those of predictions of insolvency, studies on these contributing factors are limited. The purpose of this study is to analyze the influence of changes in the housing market on construction company insolvency by using the Vector Error Correction Model. Construction companies were divided into two groups, and the expected default frequency(EDF), which indicates insolvency of each company was measured through the KMV model. The results verified that 10 largest construction companies were in a better financial condition compared to relatively smaller construction companies. As a result of conducting impulse response analysis, the EDF of large companies was found to be more sensitive to housing market change than that of small- and medium-sized construction companies.

• The Korean Journal of Financial Management
• /
• v.25 no.3
• /
• pp.131-153
• /
• 2008

This paper calculates the Risk Index of Korean securities industry that summarizes the information contained in seventeen financial indicators that represent risk categories such as capital adequacy(C), asset quality(A), earnings(E), and liquidity(L) by using the NBER statistical methodology. For the validation of Risk Index, expected default frequency has been used, and the result has been proved to be positive. According to the compiled Risk Index, the level of risks of Korean securities industry has been decreasing from the second quarter of 2003 to the first quarter of 2006 by 22 percent. But the risk has been increasing during the periods from the first quarter of 2002 to the first quarter of 2003 and from the first quarter of 2006 to the last quarter of 2006.

• Korean Journal of Construction Engineering and Management
• /
• v.15 no.2
• /
• pp.87-94
• /
• 2014

This study aims to analyze the relationship. The study applies EDF (Expected Default Frequency) as a variable that indicates management status of a construction company. To analyze changes in business structure of construction companies, the study refers to the amounts of domestic and overseas project orders as variables. The data was retrieved from TS2000 established by Korea Listed Companies Association (KLCA), Statistics Korea and International Contractors Association of Korea. The analysis period is between first quarter of 2001 and fourth quarter of 2010. The analysis results showed that as more domestic and overseas orders rolled in for domestic companies, their business conditions improved as the hypothesis suggested. However, the level of improvement varied. Further, when construction companies' business slowed down, the proportion of overseas projects tended to rise, while the ratio of domestic business decreased.