Impact of Corporate Credit Scoring on Construction Contractors in China

Abstract

In an attempt to enhance the trustworthiness of contractors and reduce corruption, the Chinese government has launched a construction contractor credit scoring (CCCS) scheme in Beijing to evaluate the compliance and integrity of contractors registered in the construction market. The contribution of this paper to the body of knowledge is to analyze how the incorporation of CCCS may affect general contractors’ present and future competitiveness through a case study in China. This paper analyzes the procurement of 158 building projects tendered in Beijing involving 2,071 local general contractors active in the market. The results show that (1) the contractors’ CCCS scores are important for being awarded large and mega project contracts; (2) CCCS scores have a generally positive effect on future corporate financial income; and (3) contrary to expectations, the policy does not increase the CCCS of companies. Finally, the changing trend in contractors’ CCCS scores is observed to be highly correlated with their initial values (the scores of higher CCCS scoring companies increase faster on average than that of other companies). The final remarks address ways to better implement CCCS schemes in the future and avoid the potential risks involved in their use.