Study On The Risk Of External Security Of Chinese Listed Company

In the past several years, the Chinese listed company frequently provided great amount of loan guarantee for other companies, which thus brought a lot of financial crises for themselves.In this way, the risk of external securities could not be overlooked any more, and it needs to be controlled rationally.Thus this paper focuses on the revealment and modeling of the risk in external security.The paper collected all the data of the loan guarantee published in the annual reports from 2000 to 2005, which includes 23498 securities. Based on the data, it analyzed the amount, mode and the relationship between the two companies of the loan external securites. The different tendency to provide loan guarantee of the listed companies in different industries, different market scale was discovered.After that, it took a further study in the internal causes of the external securities: financing limit in the Chinese capital market, the corporate governance and the regulatory policies.After the statistics study of the total securites data, the paper tried to find out the change of the stock price on the market after the company took the deal of providing external guarantee. However, the differences are not distinct, there are two reasons: the external securities were not published in time or even never, so the market is unwitting; people did not pay attention to the negative influence of the external securities to the company value,the risk of the external securities hasn't been paid good atterntion to.By real option model, Black-Scholes option model, the risk value of the external securities was counted, as guarantee behavior is like an option.But the result turned out to be nearly zero, as the amount of a single security is not so great to bring the company to bankruptcy. The most important risk lies in the security chain and several securities, but not a single security event.In order to study the security chain, the paper studied the relationship of the security events and got the basic units of the security chains, which contains 538 basic units and they make up 1304 chains, in which 185 are mutual security couples.What is more, the Chinese listed companies have formed a lot of security circles or even network. The risk is incredibly huge, it could even cause systematic crisis.By the collection of the 1772 litigations caused by external securities from 2000 to 2005, we can see that the amount reaches 48 billion in all. Different industries have suffered from different lost amount caused by the securities and the most serious loss mainly takes place in the security chains and circles.The risk of security chain is modeled by different types of chain respectively and the dynamic model of the straight line of security is built up. All the results tell us that the risk increases greatly as the chain spreads the risk.In conclusion, the risk of Chinese security chain should not be overlooked, and the paper revealed the risk of the external securities especially the security chain step by step, which could be useful reference for the companies themselves to control the loan guarantee and the regulators and investors to recognize the risk.