Emprical Research Of The Impact Of The Incentive Structure Of Debt Contracts On Farmers Credit Rationing

Incomplete rural financial markets lead to asymmetric information existsbetween farmers and rural formal financial institutions, it makes credit rationingwhich is the essential issues to solve for the rural financial development. The existingliteratures investigating from marketization reform of interest rates or the constructionof rural financial system present many insightful solutions, but there are littleliteratures analyzing this problem from the angle of debt contracts. Debt contracts arethe micro foundations for the rural financial market transactions. Whether theincentive structure of debt contracts can ease the farmers credit rationing? Theemergence of new types of rural financial institutions increase the competition amongrural financial institutions, but what‘s their effect on farmers credit rationing throughthe incentive structure of debt contracts? To solve these problems provides a basis andideas for rural formal financial institutions supporting farmers or rural SMEs, andbenefits for the healthy development of rural formal credit market.This paper focuses on the effect on farmers credit rationing of the five incentivestructures of rural formal debt contracts and competition of financial institutions. Firstof all, based on the research of Mirrlees (1974，1975,1976) and Holmstrom (1979),analyzing the influence of five incentive structures of debt contracts to farmers creditrationing. Then, using our survey data, referencing Kochar‘s model to model thebivariate probit model and expand. To do the empirical analysis of five debt contractincentive structures effect on farmers credit rationing from three aspects, i.e., demand,supply, demand and supply. Using Stepwise regression methods, OLS and robust OLSmethods to make the results more robust. Finally, considering the rapid developmentof new types of rural financial institutions and the competition of rural formalfinancial institutions, the fifth part adds cross terms to analyze the impact of the typesof financial institutions on farmers credit rationing through incentive structure ofcontracts.Based on the theoretical analysis this paper is to do empirical test witheconometric model method. It comes to the main results as follows: firstly, Supply and demand don‘t have simultaneous relationship in the rural formal credit market;Secondly, reputation and collateral have positive function to the supply of formalfinancial institutions; Thirdly, through the optimization of group lending, new types ofrural financial institutions can promote the demand from themselves. Fourthly, tosome extent, the emergence of new types of rural financial institutions have positivefunction to the optimization of incentive structure of debt contracts, but they have nosignificant improvement for farmers credit rationing.