Study On The Mechanism Of Reputation Effect During Farmers' Borrowing

Farmers are the principal parter in the rural credit market, reputation is a kind of implicit contract, the reputation mechanisms which based on rural specific regional culture, social norms, customs, have major impact on farmers borrowing market. The dissertation studied the role of reputation mechanism in farmers borrowing, we focused on studying why and how the farmers reputation affects the farmers borrowing results, and interpreted the dual structure of the farmers loan market from the perspective of the reputation. On the basis of game analysis, literature research and interviews, the study established theoretical models about the information effect of the farmers reputation, the capital effects and the moderator effects of credit types. The dissertation puts up a theoretical verification by the SEM methods in which we using 612 valid samples from the six counties of Henan Province, and then confirmed and complemented the main points of the paper by case studies. The main contents and conclusions are as follows:Game analysis interpret the dynamic formation process of the farmers reputation, and the restraint effect of farmers reputation to the adverse selection and moral hazard in their borrowing: (1)The credit game showed that the farmers reputation was a function of their behavior, and the process of formation and change of famers reputation was a dynamic Bayesian adjustment process based on famers' behavior. (2)The signaling game model showed that the farmers reputation could reveal their inherent characteristics, which could reduce the adverse selection in farmers borrowing. (3)The repeated games, nested game in farmers borrowing explained the reputation, as an implicit contract, could effectively restrict farmers' moral hazardbehavior in a certain extent.The dissertation analyzed the information effect mechanism of farmers reputation, studied the specific process of signal transduction of the farmers reputation. Empirical study found that it was positive correlation between the farmers reputation and their repayment ability, repayment desirability and reciprocal inclination. And from the point of view of information, these three variables was the key for the lender choosing the borrower farmers. The reputation level of the borrower farmers may reveal and deliver information on these three variables, so the farmers reputation could be used a gist for the lenders to choose the borrower. The reputation information effect weaken the asymmetric information between borrowers and lenders, and reduced the adverse selection risk in farmers borrowing(particularly in the informal debit credit markets).The study built and verified the capital effects mechanism of the farmers reputation, and revealed the process which the famers reputation impacted farmers borrowing results by earning opportunity, substitute for collateral, cost of default and the borrowing scope. This was precisely the key that the farmers reputation restricted the moral hazard behavior after farmers borrowing. Previous research also believed that the reputation had restricted effect on farmers borrowing, but there was no in-depth study on the path and process of such a role. This study showed that a good farmer reputation was a kind of intangible capital which had mortagage effect, it could substitute the actual collateral to improve farmers borrowing result, the better the reputation was, the more obvious the collateral effect of alternative was. Meanwhile, the good farmers reputation would help them improve their future revenue opportunities, and expand the scope of their borrowing, thereby affecting the results of borrowing. Farmers reputation affected the borrowing result by the fell back cost which was another approach of the reputation capital effects - Based on credible threat of potential losses.this research Examined the moderator effect of credit types in the famers reputation effect, interpreted the dual structure of the farmers borrowing market from the perspective of the reputation. Empirical testing found that, in general, the farmers reputation information effect and capital effect had significant differences in the formal lending and informal lending, two kinds of reputation effect is stronger in the informal lending, but weaker in the formal lending..