The Investigation Of Credit Reputation

In recent years, theory of repeated game and reputation prospered and became in-depth application in different fields. Krep's work of "entry-deterrence" has become the fundamental literatures in industry organization economics, Vicker's study of "inflation-expectation" also provides a approach to credibility of monetary policy. But literatures about credit reputation is rare, also not system. In real world, credit reputation play a significant and important role in credit market, researchs on credit reputation is likely to provide a more solid foundation for monetary banking theory, that is to provide a "calculable credit". The core concepts of "credit" that traditional monetary theory is based on is a priori, not an accurate one.My article roughly divided into three parts:part ? is the theory, including chapter2to chapter6, build reputation models to introduce basic theory; part ? is case study, including chapter7to chapter9, with the credit referring center of PBC as an example for further study; part ? is the conclusion and prospect, including chapter10, gives the basic conclusion and points out the shortage of my research and the direction of the future.For this purpose, in part ? I summarizes theory of reputation on the credit market, then under the framework of repeated game, I divide it into two circumstance, imperfect public monitoring model and perfect public monitoring model, discuss its properties.The first circumstance is to discuss credit reputation equilibrium when the borrower's action are not observed. To make discussion meaningful, let Rf<R?RS. When game play only once, because information on borrower's type is asymmetric, the borrower's actions cannot be observed, project returns is disturbed by the noise and random distributed, there are adverse selection and moral hazard in credit transactions. Assumes that the borrower behavior verified statistically according to public signal, in repeated game, borrowers not only consider the current payoff, but also consider the impact of his action on future transactions, conditional on current payoff when default is less than discounted expected revenue stream, the borrowers will build a reputation. Only at the end of the game borrower exploit reputation. when reputation has value, it can alleviate adverse selection and moral hazard. Credit reputation building is a positive feedback process, the borrower in higher degree of efforts make risk lower, and get lower interest rates, thus improve reputation value, borrowers pay more attention to his reputation, work harder, and interest rates go down. As a specific assets, the value of reputation in the borrower's life cycle is not fixed, it varies with many factors. Diamond has established a model, depict the reputation value's dynamic. In chapter3, the main result is to explan the mechanism, conditions, and length of final period.Credit reputation influce interest rates and transaction volume. When game play once, borrower of commitment type always choose safe project, strategy type and general type choice risk one. When game play repeated, borrower choose risk project get failure and out of the original pool of borrower, if reputation has value, strategy type would choose safe project, through the reputation mechanism, moral hazard incentives weakened. From the two reason above, ratio of default in credit markets decline. Under the condition of competition,lenders can only get the average profit, the interest rate borrower pays will be slow down. I constructed a model to explain influence of reputation to the probability of a borrower apply for a loan. As a result, loan volume of commercial banks to a borrow will increase.The second circumstance is when the borrower action and the signal space is isomorphism. To simplify the discussion, let R?Rf,the income of the project always afford the interest. In the model, there are two types of borrowers, commitment type and strategy type, although the project income is sufficient to repay the loan, but the strategy type may default (opportunism behaviors). Assume that external enforcement mechanism is invalid, the optimal strategy of strategy type is default. In repeated game, when reputation have value, strategy type choose to repay the loan, in order to build good reputation, and only in the final period of the game, strategy type borrowers would default. This is supplement to the first case. In contract theory, the reputation is a self-enforcement mechanism, relationship of reputation and third-party enforcement is alternative and complementary. In developing countries, the court system is not robust, contract execution is vulnerable to external interference, this effect of reputation is particularly important.Part ?, we study a case of reputation mechanism, Credit Referring Center of PBC. Credit Referring Center of PBC is responsible for the construction and operation of nation financial credit information basic database. As of December31,2012, the individual information basic database collect information of822.584million people, in the database289.347million have credit records, annual accumulative queries is274.272million, average daily queries749000times. Enterprise information basic database collect for18.588million, including3.881million have credit records, annual accumulative queries is97.331million, average daily queries is266000times. As the largest credit reporting database of the word, what role had Credit Referring Center of PBC played in economic and financial activities? And how?What factors influence its efficiency?how to improve its efficiency?I use a reputation model with information cost, theoretically explain the activity of Credit Bureau. Credit reporting activities, credit information collection, processing, matching, and query all have costs, with different market competition structures and regulation framework, information processing will have different cost structures, charge policy also has difference, borrower's behavior may be changed. Through the different approach of information gathering, I compared the cost function and the influence to reputation equilibrium. Use this I study the effect of credit reporting regulation on credit activities, mainly credit report application scope, forced to submit the data, data expiration.Part ? conclusioned, mainly include:borrowing reputation is a kind of specifica assets, it can improve market performance, lower the cost of capital, expand transaction volume; Reputation as a self-enforcement mechanism is useful when external enforcement mechanism is invalid; Credit bureaus have advantages in information processing, can reduce the costs of information gathering, improve market performance; Credit reporting regulation can change reputation equilibrium affect credit market, credit reputation play a role requires a series of conditions. At the same time, I points out the shortages of my rational choice paradigm, introduction similar study of psychology, sociology, etc. The outlook section, I think in bounded rationality and pure uncertainty, credit reputation is worthy of study; What happened in the era of big data, credit reputation have profound changed. Deficiencies of the study are:(1) credit reputation theory has not fully sum up, detail of the model is not perfect;(2) the explanatory power of rational choice paradigm is limited, no human behavior psychology, uncertainty in the explanation, but as is the most commonly mentioned in modern financial theory;(3) game theory is not very skilled.The innovation of my paper:(1) built the imperfect public monitoring credit reputation model, and contrast the performace of credit market, and explains the improvement of credit market under reputation equilibrium, pointed out the source of credit reputation value, dynamic characteristics;(2) constructed model, explain that reputation can affect the probability of application to alleviate the degree of adverse selection, and then loan volumes will increase;(3) built perfect public monitoring reputation model to explain the effect of reputation mechanism when external enforcement mechanism is invalid;(4) expand model to imperfect public monitoring, applied to the credit market, for different information collecting cost function, study its influence on credit market performance.