The Research About The Risk Of University Loan

From 1999 when all schools took in more students, many universities started to borrow money from the bank for the shortage of money. Much of the loan was used in the basic—build projects which usually were long-period and low-paid. People were doubted about whether the university could repay their loan because of their poor finance situation with the coming of the maturity of their loan. A report form Chinese Society Institution has shown that the Loan of national university will become a high-risk project as the same as iron,cement and aluminum industry.However, this paper researched the reasons of the loan's risk on the basic of much material. I believe this paper will be helpful for recognizing and controlling the risk of loan, and also can fill up the blank area of this research field.One of the innovation of this paper is that I used the theory of Soft Budget Constraint as my theoretical foundation. This theory was first put forward by Hungarian economist Kornai when he was explaining the problem of socialist corporations and why these companies were inefficiency. I thought this theory was also suitable for the explanation of the university loan.The second innovation was I analyzed the risk of university loan in terms of Game theory and mathematical economics. I used the Imperfect information Dynamic Games to explain the failure of policy, and used the Backwards Induction to simulate the Game path. The result of analysis comes up to realism.This paper was made up of four parts. Firstly, I introduced the correlative theory and concepts; Secondly, I wanted readers to recognize the overall risk of university loan; Thirdly, I used the Game theory to analysis the risk; and fourthly was the conclusion and policy suggestions of this paper.The result of this research: The problem of finance system resulted in the risk of loan, but the inner reason was Soft Budget Constraint. If we can't settle this problem, even the government's supervision wouldn't help to reduce the risk. And we needed both marketable and new political methods to gain our ends.