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Development of the Credit Risk Assessment Mechanism of Investment Projects in Telecommunications
We developed a mechanism of modelling of internal credit ratings (ICRs). It is applied in investment controlling to assess the credit quality of projects of telecommunication companies. Its advantages over the conventional credit risk modelling approaches are higher robustness and incorporation of all modelling operations in one mechanism. The mechanism gives the possibility to compare of modelled ICRs to the public credit ratings assigned by reputable international credit agencies. To achieve higher accuracy, the mechanism converts the input financial data, presented in different accounting standards, to the common basis. The explanatory variables in the mechanism are closely aligned with the credit risk assessment factors listed in the methodologies of international credit rating agencies. The testing of the mechanism shows that ICRs modelled with application of our mechanism had the accuracy ratio of 55% for testing sample and 65% for the design sample. This exceeds the accuracy ratios of ICRs modelled with application of conventional approaches (37%–42%).