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An Incentive Mechanism Model of Credit Behavior of SMEs Based on the Perspective of Credit Default Swaps

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  • Shenghong Wu
  • Pei Mu
  • Jiaxian Shen
  • Wenyi Wang

Abstract

The rapid development of credit default swap (CDS) market has changed the manner of credit risk management of banks to some extent and has had a new influence on the bank-enterprise credit model. In this study, the credit financing process of credit risk in small- and medium-sized enterprises (SMEs) gathers within a bank, which makes it difficult for SMEs to raise funds. On the basis of the perspective of CDS, we construct an incentive game model of bank-enterprise credit behavior and analyze the influence mechanism of the credit financing of SMEs on CDS contract coupon rate, CDS payout ratio, bank-enterprise credit effort, and loan recovery rate when considering CDS. The result shows that the CDS contract leads to insufficient supervision after a bank loan, the moral hazard of the SMEs rises, and the probability of credit default events increases. In addition, in view of CDS, the SMEs can access more credit funds.

Suggested Citation

  • Shenghong Wu & Pei Mu & Jiaxian Shen & Wenyi Wang, 2020. "An Incentive Mechanism Model of Credit Behavior of SMEs Based on the Perspective of Credit Default Swaps," Complexity, Hindawi, vol. 2020, pages 1-8, December.
    • Handle: RePEc:hin:complx:6639636
    DOI: 10.1155/2020/6639636
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    Cited by:

    1. Evangelos Katsamakas & J. Manuel Sanchez-Cartas, 2024. "A computational model of the effects of borrower default on the stability of P2P lending platforms," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(3), pages 597-618, September.

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