A credit scoring model for SMEs based on accounting ethics

Bo Kyeong Lee, So Young Sohn

Research output: Contribution to journalArticlepeer-review

8 Citations (Scopus)


Various types of government credit guarantee programs exist for small- and medium-sized enterprises (SMEs). The SMEs guaranteed by these programs can resolve their financial difficulties by obtaining loans from banks or being included in a pool for the issuance of primary collateralized bond obligations. However, the loan default rate for these supported firms is high owing to their moral hazard, which can be associated with unethical behavior in the accounting process. Since the stakeholders of credit guarantee programs initiated by the government include not only lenders and borrowers, but also taxpayers, the default risk of moral hazard must be minimized. Thus, an additional evaluation step is required to deal with accounting ethics, which has not thus far been considered in the literature. In this study, we propose an accounting ethics-based credit scoring model as a complementary approach, which can be used to select suitable borrowers. The proposed model is expected to reduce the default rate resulting from the moral hazard associated with unethical accounting behaviors in the supported firms.

Original languageEnglish
Article number1588
JournalSustainability (Switzerland)
Issue number9
Publication statusPublished - 2017 Sept 6

Bibliographical note

Funding Information:
Acknowledgments: This work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korea government (MSIP) (2016R1A2A1A05005270). K. T. Lim participated in the early part of this research as a graduate research assistant.

Publisher Copyright:
© 2017 by the authors.

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Renewable Energy, Sustainability and the Environment
  • Environmental Science (miscellaneous)
  • Energy Engineering and Power Technology
  • Management, Monitoring, Policy and Law


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