Research On The Contagion Effect Of Credit Risk Within Dongxu Group

Economies of scale for groups can go some way towards easing the financing constraints of group companies and helping them to become more competitive in the market.However,the large number of group bankruptcies in recent years has drawn global attention to the credit risk of groups and has drawn companies’ attention to the importance of credit risk control.The complex and extensive transactional and capital links between companies within a group make credit risk highly contagious between group companies.Therefore,in this thesis,in order to further understand the spread of intra-group credit risk,Dongxu Group,a representative group of enterprises,is selected as a sample research object to study the results,course and causes of the spread of its intra-group credit risk,and to put forward suggestions on the prevention and control of the spread of intra-group credit risk,so that it may be used as a reference for other related groups.The work is structured as follows.The following briefly describes the background and significance of the study,provides an overview of the impact of credit risk spillovers within groups of companies,and presents the study’s content,methodology,contributions and limitations.Secondly,the theoretical basis of credit risk spillovers,the ways in which they occur and the methods used to assess them in corporate groups are analysed and explained.This is followed by an overview of the Dongxu Group and a review and analysis of the results of the Dongxu Group’s default and internal credit risk spillover.The vectors,paths and causes of internal risk contagion in the Dongxu Group are then analysed and the impact of contagion in the Dongxu Group is assessed using a Z-score model.Finally,conclusions and recommendations are presented.By investigating the impact of the contagion of the Dongxu Group’s internal credit risk,the following conclusions are drawn:(1)the contagion of the Group’s internal credit risk mainly occurs through three channels:(2)aggressive corporate expansion,highly leveraged operation,and(3)aggressive expansion,highly leveraged operation,lack of "bloodshed",and the concurrent appointment of top management may increase corporate credit risk.Based on the above findings,the following recommendations are made:(1)At the corporate group level: Firstly,the group should control the sources of contagion and strengthen the early warning system of credit risk to prevent the occurrence of credit risk in the group;Secondly,the enterprise should strengthen the management of related internal transactions to stop the contagion risk and prevent the occurrence of credit risk in the group;Finally,if the contagion of credit risk in the group has already occurred,the enterprise should prudently select the first enterprises to be "bailed out" to facilitate the group’s overall response to the spread of credit risk.