The Research Of The Credit Risk Contagion In The Supply Chain Based On Implicit Equity

With the development of the process of marketization recently, the business activity among supply chain enterprises becomes more frequent and the enterprises are getting increasingly connected. Correspondingly, the issue regarding the credit risk contagion among the supply chain enterprises has become one which we can’t ignore. There’s still room for improvement about previous research with respect to infectious default correlation and cyclical default correlation. Thus according to the deficiency of current research and based on the theory of implicit equity that the net cash flow of the upstream enterprises obtained from the downstream enterprises can-be viewed as the stock dividend payed by the downstream buyer each period, this paper innovatively discusses the relationship of accounts receivable financing, buy-back and risk preference of the downstream enterprises with the credit risk contagion in the supply chain by building a model regarding infectious default correlation. And the result shows:(1) with the increase of the proportion of accounts receivable financing, the associated credit risk contagion in the supply chain is weakening. (2) when the proportion of buy-back is in the range in which the value is relatively larger, with the increase of the proportion of buy-back, the associated credit risk contagion in the supply chain is strengthening; when the proportion of buy-back is in the range in which the value is relatively smaller, with the increase of the proportion of buy-back, the associated credit risk contagion in the supply chain is weakening. (3) with the increase of the sensitivity towards risks of the downstream enterprises, the associated credit risk contagion in the supply chain is weakening.Besides, this paper also innovatively discusses the relationship of demand risk, exchange rate risk and risk-free rate fluctuation risk with the credit risk contagion in the supply chain by building a model regarding cyclical default correlation. And the result shows:(1) with the increase of demand risk, the credit risk contagion in the supply chain is strengthening. (2) with the increase of exchange rate risk, the credit risk contagion in the supply chain is strengthening. (3) with the increase of risk-free rate fluctuation risk, the credit risk contagion in the supply chain is weakening. Furthermore, when taking the monetary policy into account, this paper finds that the degree of the credit risk contagion in the supply chain is relatively smaller during the period of tight monetary policy; the degree of the credit risk contagion in the supply chain is relatively larger during the period of easy monetary policy; and the degree of the credit risk contagion in the supply chain during the period of prudent monetary policy is somewhere in between that during the period of tight monetary policy and easy monetary policy.After the model analysis, the empirical study of this paper uses the linkage between stock prices to measure the credit risk contagion, and innovatively makes comparisons between different supply chains and cycles based on the data from the relevant supply chain during the period 4th January,2006 to 30th April,2015. This paper mainly explores the relationship of the relevant factors, risk preference of the downstream enterprises and risk-free rate fluctuation risk, with infectious default correlation and cyclical default correlation based on the theory of implicit equity, and in the meantime makes objective evaluation research. Eventually, the result shows that infectious default correlation and cyclical default correlation do exist and we can lower the risks by optimizing the combination of the supply chain enterprises. What’s more, this paper further proves the relationship of risk preference of the downstream enterprises and risk-free rate fluctuation risk with infectious default correlation and cyclical default correlation. And the result turns out exactly the same with the previous model analysis, thus emphasizes the theme of the credit risk contagion in the supply chain based on implicit equity, providing the theoretical support for the credit risk control and its development in the supply chain.