The identification of indicators influencing the credit risk if automotive companies in the Czech Republic

Abstract

The paper deals with the credit risk and identification of indicators, which influence the rating of automotive companies in the Czech Republic. Methods used in this study were correlation analysis, descriptive statistics and panel data regression. The aim of this paper was firstly to calculate the ratings of automotive companies in the Czech Republic utilizing the Aspect Global Rating model and then determine, which indicator has the highest influence on rating of tested companies. The Aspect Global Rating model consists of seven indicators: operating margin, return on equity, depreciation coverage indicator, prompt liquidity, self-financing indicator, return on operating assets, and assets turnover ratio. When using the Aspect Global Rating model, the research results indicate that the company's rating is statistically dependent on the value of the depreciation coverage indicator. The depreciation coverage indicator was proven to have the highest impact on the rating. After that, the data was subjected to panel data regression and three models were created. Proposed models solved the dependency between the depreciation coverage indicator and rating. First model tested hypothesis, that rating of the company is not dependent on the depreciation coverage indicator, whereas second model tested, whether rating is dependent on the depreciation coverage indicator and last model was focused on the dependency between rating and tested indicator when the time component was considered. The comparison of models has shown that there is a statistically significant difference between model 1 and model 2 and the rating is statistically dependent on the value of the depreciation coverage indicator. There is a similar situation between model 2 and model 3. There is a statistically significant difference and the rating is dependent on time. Automotive companies should focus on the depreciation coverage indicator, as it is ascertained from research that it has the most significant impact on values of rating.