Study On Game Model Of Banking Credit Default Behavior Of SMEs

The fact that SMEs have high credit default rates not only has affected their sustainabledevelopment severely, but also brought huge risks for bank credit business. Study on how toavoid the credit default risks and low the default rates of SMEs is the key to realize mutuallybeneficial prospects among government, banks and enterprises in the macro economicbackground of “financial disintermediation”,”interest rates liberalization” and “economicdownturn”.This paper is aimed at exploring methods to reduce SMEs’ credit default rates by meansof establishing game models between banks and SMEs. Besides, the paper introduced a newvariable “bribery cost”, which is in accord with our national conditions. The innovativeintroduction of the variable not only optimizes the existing game model, but also connects thebefore-loan signal game model with the post-loan evolutionary game model. Besides, thispaper discussed the critical realization conditions from the prospective of the new gamemodel maximizing social benefits and put forward some advices for reducing the creditdefault rates of SMEs from the point of government and banks.By analyzing post-loan evolutionary game model, results showed that enterprises groupwill tend to choose not to breach loan contracts when banks’ regulatory ratio is greater than aquotient. The quotient is the difference divided by the punishment cost. And the difference isloan principal and interest minus bribery cost. Also, banks group will tend to choose not tosupervise SMEs’ credit default behaviors when SMEs’ default ratio is less than anotherquotient. This quotient is banks’ supervision cost divided by the punishment revenue. Byestablishing a new relation game model between banks and SMEs, we propose that the modelwill realize its function of maximizing social benefits when the bribery cost of inferior qualityenterprises is greater than the difference, which is the loan principal and interest minus theaverage supervision revenue. The average supervision revenue is a constant, which is banks’regulatory ratio multiply with punishment revenue. In order to improve the bribery cost, thispaper explored several methods to approach this issue and put forward some policyrecommendations from following aspects, such as numbers of applying loans, cost-oriented policy, revenue-oriented policy, industry reputation and firm reputation, etc.It is significant to study on the credit default phenomena of SMEs. On one hand, it willhelp reduce the risk of bank credit business, improve banks’ profit growths. On the other hand,it will promote SMEs’ rapid and healthy development. Moreover, it will draw great attentionof our government to credit markets development, and provide some advices for improvementof financial markets.