The Research on Correlations of Credit Risk and Moral Hazard for the EG

Yu XIA, Zongfang ZHOU, Yang YANG, Cao XU

Abstract


This paper, under the assumption of risk-neutral, analyzed the relationship between the probability of occurrence of moral hazard and the default probability of the EG (enterprise group), theoretically demonstrated the inner mechanism between the moral hazard and credit risk of the EG, and highlighted the role of bank loan interest played in the control of moral hazard and credit risk. The research shows: (1) There is nonlinear relationship between the probability of occurrence of moral hazard and the default probability of the EG; (2) There is an exogenous variable, loan interest rate, which makes the default probability extremum.

Keywords


EG (Enterprise Group); Moral Hazard; Default Probability; Loan Interest

References


[1] Merton, R. C. (1974). On the pricing of corporate debt: the risk structure of Interest Rates. Journal of Finance, 29, 449-470.

[2] Jarrow R. A., Lando, D., Turnbull, S. M. (1997). A markov model for the term structure of credit risk spreads. Review of Financial Studies, 10(2), 481-523.

[3] Edward I., Altamn. (1968). Financial ratio discriminant analysis and the prediction of corporate bankrupt. The Journal of Finance, 23(4), 589-609.

[4] Chen, L., Zhou, Z. F. (2008). A fault tree analysis for credit risk of enterprise group’s holding company based on Multi-hiberarchy Fuzzy Logic. System Engineering, 12, 52-56.

[5] Chen, L., Zhou, Z. F. (2009). A research based shareholding ratio on default contagion between parent and subsidiary company in an enterprise group. Journal of System Engineering, (3), 80-84.

[6] Chen, L., Zhou, Z. F. (2010). The agent’s risk attitude, moral hazard and credit risk contagion in an enterprise group. Journal of Management, 3, 344-349.

[7] Koskela, E., Stenback. R., (2000). Is there a tradeoff between bank competition and financial fragility. Journal of Banking & Finance, 24(12), 1853-1873.




DOI: http://dx.doi.org/10.3968%2Fj.mse.1913035X20130701.1259

Refbacks

  • There are currently no refbacks.


Reminder

If you have already registered in Journal A and plan to submit article(s) to Journal B, please click the CATEGORIES, or JOURNALS A-Z on the right side of the "HOME".


We only use three mailboxes as follows to deal with issues about paper acceptance, payment and submission of electronic versions of our journals to databases:
caooc@hotmail.com; mse@cscanada.net; mse@cscanada.org

Copyright © 2010 Canadian Research & Development Centre of Sciences and Cultures
Address: 758, 77e AV, Laval, Quebec, H7V 4A8, Canada

Telephone: 1-514-558 6138
Http://www.cscanada.net Http://www.cscanada.org