Research On Self-enforcing Contract Mechanisms Of Interconnection Loan Cooperative Organization

With the rising of cooperative organization in China’s rural areas,cooperative organization plays a more important role in promoting peasant households to participate in market transactions.However,due to the questions of peasant households,such as shortage of funds and opportunity behaviors,the work of cooperative organization faces many difficulties.Interconnection loan connects counterparty closely,it can solve the fund shortage of peasant households,it also avoid opportunity behaviors and achieve the stability of contractual relationship.Thus,it is suitable for most rural areas.Although many scholars did many studies on the fund shortage and opportunity behaviors of peasant households,the study based on interconnection loan of cooperatives and farmers is few.How to limit the opportunity behaviors of peasant households and How can interconnection loan make people execute their promises are two questions that are worth studying.Therefore,the essay will analyze the behavior of cooperative organization from the perspective of specific asset and reputation effects,and then build the basic research framework.This essay includes three parts:Firstly,contract economic behaviors of cooperative organization.It will discuss the contractual economic behaviors of cooperatives and core members,cooperatives and ordinary members,vertical integration of cooperative organizations and horizontal integration of cooperative organizations.Through the research,it was found that both core members and ordinary members in cooperatives have opportunistic behaviors,but the average members are more serious.The vertical integration and horizontal integration of cooperative organizations can produce economies of scale,save transaction cost and avoid opportunistic behavior of members.Secondly,economic analysis of specific asset and reputation effects.Based on the study of scholars and the study of this paper,the special assets of cooperative investment are divided into designated specific assets and non-designated special assets(The special assets that don’t need to be used for product production,and there is a substitution of similar special-purpose assets,which is not considered in this article).The specific assets of peasant households are divided into material specific assets and specific assets of human capital.It is found that the opportunistic behavior of both sides is restricted to a certain extent when there is a special asset investment in the cooperative and the its members.The cooperative realization of the cooperative and the members are the self-enforcing contract.Based on different economic factors,the reputation is divided into the reputation of cooperatives and the reputation of members.The reputation effect of cooperatives will cause credible punishment and commitment,threatening or inducing members to abide by the contract.The reputation effect of the members is mainly manifested in increasing the income of the current and future of the abiding or reducing the earnings of the current and future after the breach of contract,and promoting the members to abide by the contractual relationship.Thirdly,self-enforcing contract mechanisms of interconnection loan cooperative organization.Based on the analysis of the behavior self-enforcing of economic actors,the logical deduction method is used to deduce the self-enforcing mechanism of interconnected loans.Foremost,it analyzes the relationship between special assets and self-enforcing contract of interconnected loans.The research finds that special assets can promote self-enforcing of interconnected loans.Moreover,the stronger the specificity of the material assets and human capital of the members,the stronger the willingness of the members to abide by the contract,the stronger the self-enforcing capability of the interconnected loan.Then,it analyzes the relationship between the reputation effect and the self-enforcing of the interconnected loan.It is found that reputation effect can promote interconnected loans’ self-enforcing,and the stronger the reputation effect of cooperatives and members,the stronger the self-enforcing capability of interconnected loans.Finally,it analyzes the relationship between specific assets,reputation effects and self-enforcing of interconnected loans.It is found that specific assets can enhance reputation effect,thereby promoting self-enforcing of interconnected loans.The stronger the specificity of the material assets and human capital assets of the members,the stronger the reputation effect of the members,the stronger the self-enforcing capability of interconnected loans.The stronger the designated assets of the cooperative investment,the stronger the reputation effect of the cooperatives,the stronger the self-enforcing capability of interconnected loans.It is regrettable that the data is difficult to obtain.This essay only conducts theoretical analysis and logical deduction,and fails to use the empirical analysis for further verification on the self-enforing mechanism of cooperative organizations’ interconnected loans based on data.