Abstract Ever since 1980, facing the impact of the more freedom of trading market and the fast developing on the new technology, financial market grows rapidly in prosperity. Especially the derivative financial goods are brought to the market, the financial organization¡¦s affairs and trading styles become more diversified, also added new risks of uncertainty. Furthermore, more complicated credit risk patterns caused the traditional measuring tools of financial risk among market participants, even risk structure and credit culture being severely challenged. During 1990, financial crisis or fraud cases consecutively happened in the international financial market, so the financial risk management has become a subject concerned by financial organizations, government and the public investors. However, credit risk is always the focus in all the financial risks. Especially the Basel Committee on Banking Supervision, (a branch of the Bank for International Settlements, BIS), published ¡§The New Basel Capital Accord¡¨ (Basel II). In this New Basel Capital Accord, it not only emphasizes the importance of credit risk, but also allows financial organizations to develop Internal Rating Based Approach, ¡§IRB¡¨ to evaluate and calculate proper risk capital. These operations for credit risk evaluation model¡¦s development have been focused on the academic circle, government, and business circle. Since Merton (1974) has applied options pricing model as a technology to evaluate the credit risk of enterprise, it has been drawn a lot of attention from western academic and business circles. Merton¡¦s Model is the theoretical foundation of structural models. Currently, the famous KMV Model in practically is the extension of application of Merton¡¦s Model. Merton¡¦s model is not only based on a strict and comprehensive theory but also used market information stock price as an important variance to evaluate the credit risk. This makes credit risk to be a real-time monitored at a much higher frequency. This advantage has made it widely applied by the academic and business circle for a long time. According to this research topics: (1) Credit risk holds geographical and culture character. Though credit risk evaluating model introduced from the foreign, yet it still has to be modified locally and it also needs more supports from local theory and practical case study. (2)Structural model is based on ¡§look-forward¡¨ analysis. It implies market-based information contents. (3) After prudent and careful analytical consideration about domestic capital market, the electronic business is the mainstream of domestic stock market, and also the competitive business for Taiwan in the world, meantime, electronic business has a higher level of sensitivity in three phases of profit, prosperity and risk. So that, I choose electronic companies in the public stock market as my research target and time frame is across 2004 to 2006, by means of KMV model which is a mainstream of structural model to evaluate credit risk, developed by Moody¡¦s Co. USA. I also referred to ¡§Small and Medium Enterprise Credit Guarantee Fund Main Guarantee Business Default Probability and Credit Risk Valuation Research Report¡¨, authored by C. J. Kuo (2006) for the variable definition and selections giving very thorough considerations. As I proceed a series of research in using EDF (Expected Default Frequency) of KMV model as well as a number of empirical investigation procedures in integrity and individual electronic business. I find out that EDF of KMV model it can obtain the prominent effect in credit risk and the prediction ability in advance. This paper can provide research result as a reference to risk-manager and to assist investors and governor to discern the depth of risks that the enterprise involved and then to decide the policy of strategy investment and level of risk management. Eventually to minimize the cost of credit checking and enterprise capitals, while to maximize the managerial efficiency and the profitability is the contribution of this paper could be.

It is the key what determined the future of a company the economic behavior practiced from the commercial credit, and the performance of a customer decides the probability of the bad debt from the account receivable. To avoid the bad running of a business unit from terrible cash flow from account receivable, and lead to financial crisis or failure, I try to dig in the problem of the business to give credit failure. Finally, I hope to run a system of crisis prediction to avoid this kind of problem. Try to use the KMV Model on the companies which were listed on the stock exchange market belonged to the Printed Circuit Board (PCB) industry from 2004 to 2006. The result of verification ,the Distance-to-Default(DD) average is about 3.4982; and the Expected-Default-Frequency(EDF) probability average locates on 0.0084. In addition , used the size of capitalization and the analysis of financial ratios to evaluate the internal credit line system in a clinical way, and upgrade the risk management of credit, risk judgment measurement to decrease the loss in the meanwhile.