Risk contagion in inter-firm credit guarantee network

Lei Wang, Shouwei Li and Chaoqun Wu

Physica A: Statistical Mechanics and its Applications, 2019, vol. 526, issue C

Abstract: By introducing the dynamic change model of external investment price, this study constructs a dynamic risk contagion model of inter-firm credit guarantee network, and studies the dynamic risk contagion mechanism of inter-firm credit guarantee network. From simulation analysis, we find that the losses caused by the proportional decline of external assets price may be shared by related firms, thus reducing the possibility of firm bankruptcy. However, the total loss of guaranteed accounts payable may also directly affect related firms and accelerate the spread of bankruptcy risk. With the increase of asset price decline index, the price of external investment declines. Firms are more sensitive in the initial stage and difficult to adjust the amount of external investment in time, resulting in large losses. However, with the gradual completion of the amount adjustment of the external investment, the further loss of external investment can be reduced, and the number of bankrupt firms continues to decline. If the heterogeneity coefficient of the amount of inter-firm credit guarantee is greater, it is more likely to induce the contagion of inter-firm bankruptcy risk. Under the interaction among different credit guarantee parameters, the contagion volatility of inter-firm bankruptcy risk increases. The risk shock of internal inter-firm linkages is more significant than the risk shock of external inter-firm.

Keywords: Inter-firm network; Credit guarantee; Risk contagion; Complex network (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:526:y:2019:i:c:s0378437119304364

DOI: 10.1016/j.physa.2019.04.078

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