The Co-movement Effect Research Of Loss Given Default In China Banking Sector

In the management and administration of banks, the risk control of Loss Givendefault is playing an important role in the Banking sector. However, credit riskresearch was mainly focus on possibility of default, not on LGD. In the recentresearch of LGD were highly concentrate on the basic problem of the nature,distribution, etc. Or a small amount of empirical research on the subject ofmicroscopic. This paper is respectively through bank、district and industry views tofind coupling effect of LGD indicator. The sample was used seasonal numbers of LGDbetween2005to2013. First, use those indicators to analyse the historicalperformance of LDG in the industry area and regional area. Then，use Grangercausality test to Analysis their causation, research Intrinsic linkage mechanism byMinimum spanning tree. On this basis, analysis of the direction and extent of linkageeffects by the impulse response method.This paper finds out that, based on theoretical research and empirical research,coupling effects were weaker in foreign banks and other commercial banks than ruralcommercial banks and other financial institutions. The highest coupling effect ofState-own large commercial banks is0.4. In the regional linkage，the geographiclocation of the LGD have a certain aggregation effect，East China region in which thestrongest linkage. Further analysis on seven regions, the linkage approachsummarized as①"a center", taking Beijing as the center of North China，takingHenan as the central of the center China. The "multi-center" linkage takes the eastChina and the eastwest as the representation. The "closed type" linkage takes thesouth China and northwest as the representation。the industry mainly shows thelinkage mechanism between the two sectors. First, LGD would affect the upstreamand downstream industrial chain. Second, similar industries would be influenced bycoupling effects of LGD. Manufacturing industry, accommodation and catering, resident services and other service industries, the four industry culture, would gather20micro segments together.