Research On Credit Default Behavior And Risk Prevention Of SMEs In China

The development of SMEs has been troubled by the fact that the contribution made to economic growth by SMEs and the credit granted to SMEs by financial institutions is unmatchable. The main reason that SMEs finance difficultly is due to the high credit default ratios. Faced with the challenges of financial globalization and the development of SMEs, as well as the requirements of New Basel Capital Accord, this paper, drawing on international experience, from the theoretical and empirical point of view, researched and explored credit default behavior and the preventive measures.Based on the risk definition, applying modern principles and methods of economics, such as asymmetric information theory, game theory, incomplete contract theory, theory of soft budget constraints, and theory of business value, combining with the methods of mathematical analysis, quantitative and qualitative analysis, theoretical argument and empirical analysis, closely around the theme of SMEs credit default, first of all, we constructed a theoretical framework of SMEs credit default behavior in a dynamic game of perfect information, comprehensively analyzed SMEs'own quality, asset size, soft budget constraints, legal and credit systems, the relationship between macroeconomic environment and SMEs credit default, and then, under the framework of discrete-time hazard model, taking the loan granted to SMEs by a certain commercial bank as a sample, and according to five-category loan classification standard (substandard, doubtful and loss defined as the loan default), we analyzed the impact of business nature, firm size, industry characteristics, business operation capacity,(of sixteen financial ratios were analyzed, excluding the relevance ratio, eight financial ratios were screened. By scatter analysis, four financial indicators were screened), loan ratio, business owner's personal security, macroeconomic conditions, legal environment, from the empirical perspective, on SMEs. Research showed that:①the nature of business affects default probability greatly. Due to governance structure and soft budgetary reasons, the limited company's default rate is lower than that of limited company.②Enterprise scale negatively correlated with the probability of default. Compared with smaller enterprises, large-scale enterprises have advantages of technology, capital, talent, and market, the ability to resist risks is strong, and the probability of default is smaller.③there are different default probabilities for different sectors. Data analysis and Logit regression shows that commercial and real estate sectors are of higher default rates, and the manufacturing and public utilities are of lower default rates.④the business operation capacity affects default probability greatly with a negative correlation. Financial indicators mainly reflected business operation capacity. Corporate liquidity ratio, quick ratio, total asset turnover ratio, return on equity are inversely related to corporate default probability.⑤corporate loan ratio reflects the risk-bearing capacity of investment projects. The higher the loan ratio is, the lower the risk-bearing ratio of the projects is. The higher the risk of moral hazard that the corporate violates commitment to select high-risk project, the greater the probability of default; corporate mortgage and collateral ratios are directly proportional to loss of corporate loan default, therefore, the corporate loan default probability is positively related to corporate mortgage and collateral ratios, that is, when corporate mortgage and collateral ratios increase, the default losses of banks will rise, and the corporate default cost will reduce, the corporate default probability will also increase; if the loan agreement called for owners of enterprises to assume security responsibility with their family property, the default probability of assuming security responsibility with their family property is lower than that of assuming security responsibility without their family property.⑥macroeconomic environment, the level of economic development in the region directly affects the default probability of companies, GDP per capita, and income per capita, the higher the income per capita, the lower the possibility of corporate default.⑦legal environment may also affect businesses default behavior. The higher the degree of legal system imperfect, the less effective protection of bank interests, the higher the corporate default probability.Then SMEs credit default risk model is illustrated and compared. a number of modern credit risk measurement models are systematically compared in order to explore the adaptability and put forward new methods of measuring credit default risk.Finally, for SMEs credit default behavior, we analyzed the measures that the commercial banks should take from the aspects of introduction of credit guarantee to disperse credit default risk, the implementation of relationship lending, enlargement of information and human capital input; Government should create a favorab external environment and institutional system from improving the legal and credit environment of SME credit market, establishing a sound credit management system for SMEs, improving the credit rating mechanism for SMEs, establishing social credibility mechanism, and constructing insurance mechanisms for SMEs credit; SMEs should improve their own quality and competitiveness, enhance the risk resistance and defense capabilities. It is tripartite cooperation of government, banks, and enterprises, then SMEs credit default risk can be effectively controlled.