Reseach On Credit Risk Contagion And Evolution Of Business Group

With the Continuous development of economic globalization, business groups play increasingly important roles and they are prevalent around the world. Because of the scale advantages of business groups, the attempts by banks to attract business groups by providing favorable rates and flexible policies has been tremendous success in the past two decades. Man banks have benefited from their business group customers. However, the worldwide financial crisis in 2008 and subsequent bankruptcy of numerous business groups demonstrate that bank can never afford to ignore the importance of the credit risk of business groups. Thus, the need for credit risk control by banks for business group customers has never been as urgent as it is as present. Due to the interwined relationship among the subsidiaries in business groups, the credit risk of business groups is always much more complex compared with individual companies in reality. In order to understand the credit risk of business groups in more depth, this study respectively discussed the credit risk infection and evolution of business groups with perspective of subsidiaris and business group as a whole. Specifically, this study carried out the following research:Firstly, this dissertation compared business groups with individual companies and concluded the general characteristics of credit risk in business groups by sorting out and summarizing relevant literatures. Then it discussed adaptability of experienced parameters applied in credit risk evaluation of business groups. The empirical results shows that there is significant difference between credit risk of business groups and it of individual companies. And a model is proposed to explain mechanism of credit risk amplification in business groups at last.Secondly, the dissertation analyzed credit risk contagion in business groups with three typical interconnectedness of business group respectively. It described the change in value of subsidiaries by structure model and measured credit risk contagion of business group by conditional probability distribution of default in the context of assets correlation. It also described interactions among subsidiaries by game theory and discussed how these interactions influence on credit risk contagion in business group in the context of transaction correlation. At last it explored credit risk contagion in business groups in the context of human capital correlation through effect of hierarchical structre and bounded rationality on credit risk contagion in business groups.Thirdly, this dissertation constructed a dynamic decision-making system of subsidiaries and described dynamic evolution processes of credit risk in business groups based on newsvendor market assumption. The conclusion of system stability analysis and numerical simulation shows that chaos will emerge in the credit risk of a business group due to the dynamic decision-making processes in its subsidiaries, even if the interactions in the business group are fairly simple.Finally, according to the operation of business groups, the dissertation described the interactions among heterogeneous subsidiaries in business group and interactions between business group and heterogeneous companies in external market. Further it discussed the credit risk evolution characteristics of business groups, i.e. delayed effect and spillover effect. At last it also analyzed the impact of business group size, external market condition, and leading behavior of subsidiary on credit risk evolution characteristics of business groups.It is belived that this study can not only explain some typical economic phenomeno, but can also provide beneficial inspiration for banks to control the credit risk of their business group customers.