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An Analysis on Underwriting Criteria for Construction Firms: In Case of Specialty Construction Firms

Kim, Myeong-soo 1 Mahnsoon Kwak 1

1가톨릭대학교

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ABSTRACT

This study aims to analyze underwriting criteria for the public construction projects, focusing on specialty contractors. In order to specify the underwriting criteria, Logit model is used in forecasting construcitng firm's bankruptcy. Construction guarantee is a contract relation accompanied liabilities of three agents: owner, construction company, guarantee insurance company(called surety agent hereafter). This contract guarantees fulfilment of construction when a agent cannot do his liabilities on the contract. In construction industry, surety agent can exclude unqualified firms from the market. Surety agent evaluate construction companies by reviewing contract document and checking contract conditions. This process is called underwriting. According to empirical results, the best Logit model includes liquid assets, capital, current net profit, the rate of ordinary income of total capital, uncompleted amount per project. Underwriting criteria is arranged from 0.3 to 0.5.

Citation status

* References for papers published after 2022 are currently being built.