A Study On Incomplete Contract And Ex Ante Control Of Credit Risks

Imperfection of financial markets that includes imperfect information, uncertainty, opportunistic behavior and other factors gives birth to the financial intermediaries. Banks has the advantages in coping with adverse selection and moral hazard. But banks yet can't screen and filter debtors very well, so credit risks engender and accumulate. It is significant to study the engender mechanism and coping methods of credit risks.Till now, scholars' suggestions mostly are operational and have no relation with the essence of credit risks. Here we consider that banks should control and prevent credit risks more actively to cope with the communicate failure and incentive conflict. Loan contract is the warrant of the rights and obligation of debtors and creditors. It is the guarantee for transactions. So loan contract is the carrier that helps the implement of ex ante control of credit risks. But loan contract is incomplete, and it allows for the improvement. In order to cope with credit risks well, it is necessary to optimize the contract to lighten the incompletion.The paper follows the tenet above. In the main body, it firstly analyzes the objects of credit risks control and the efficiency of the controlling means, and points out the necessity of innovation of controlling methods and then bring forward the new concept of ex ante credit risk control. Pate two starts from incomplete contract theory and the relationship of credit risk and loan contract, it points out the integration of credit risk and ex ante credit risk control-loan contract. Pate three and part four firstly analyzes engender of adverse selection and moral hazard. Next, it researches the mechanism of infonnation screening and incentive abroad and thoroughly. The last part brings forward the contract methods and complementary measure to cope with adverse selection and moral hazard on the base of the fundamental theories and mechanism research.