Hao Lulu
ABSTRACT
Due to the relatively simple structure of agricultural industry in the same region, investment and output of co-guarantee farmers tend to show a high positive correlation. From the perspective of expected return of lending financial institutions, this paper uses mathematical tools like probability theory to comparatively analyze the influence mechanism of investment-output correlation on farmer co-guarantee loans. The result shows that when the investment is positively correlated with output, the farmer social guarantee mechanism can hardly function effectively, making the expected return of lending institutions lower than the level under independent output; cross-guarantee of farmers from different businesses or industries can reduce the positive correlation between investment and output to a certain extent, thereby increasing the expected return of lending institutions. Finally, in view of the difficulty in smooth implementation of the cross-guarantee loan model among farmers, this paper points out that lending institutions can rationally design co-guarantee loan contracts to encourage borrowing farmers to invest in low-risk production projects for safety, thereby reducing dependence on social guarantee when it is difficult to weaken positive output correlation.
- Chen Ling (2008): "Game Analysis of Factors Affecting Repayment in the Model of Farmer Co-guarantee Loan---and the Significance for Postal Savings Bank", "Journal of Beijing University of Posts and Telecommunications (Social Science Edition)" Issue 2.Google Scholar
- Lei Chunzhu (2005): "Discussion on Expanding Farmer Cross-guarantee Loan Business", "Financial Theory & Practice" Issue 3.Google Scholar
- Ahlin, C. and Townsend, R.M. "Selection into and across credit contracts: theory and field research." Journal of Econometrics, 2007, 136, pp. 665--698.Google ScholarCross Ref
- Guttman, J.M. "Assortative matching, adverse selection, and group lending." Journal of Development Economics, 2008, 87, pp. 51--56.Google ScholarCross Ref
- Ghatak, M. "Group lending, local information, and peer selection." Journal of Development Economics, 1999, 60, pp. 27--50.Google ScholarCross Ref
- Ghatak, M. "Screening by the company you keep: joint liability lending and the peer selection effect." Economic Journal, 2000, 115, pp. 601--631.Google ScholarCross Ref
- Holmstrom, B. and Milgrom, P. "Regulating trade among agents." Journal of Institutional and Theoretical Economics, 1990, 146(1), pp. 85--105.Google Scholar
- Katzur, T. and Lensink, R. "Group lending with correlated project outcomes." Economics Letters, 2012, 117, pp. 445--447.Google ScholarCross Ref
- Laffont, J.J. "Collusion and group lending with adverse selection." Journal of Development Economics, 2003, 70, pp. 329--348.Google ScholarCross Ref
Index Terms
- Influence Mechanism of the Correlation between Investment and Output of Co-guarantee Farmers
Recommendations
Managing Information Technology Investment Risk: A Real Options Perspective
Past information systems research on real options has focused mainly on evaluating information technology (IT)investments that embed a single, a priori known option (such as, deferral option, prototype option). In other words, only once a specific ...
Critical factors for determining market price of stocks traded on the Korean Stock Exchanges (KSE)
Many brokers and investors in Korea tend to believe that stock prices in Korea are unpredictable because they are determined largely by socio-political factors instead of fundamental factors of the firm. This research intends to examine the price ...
Commentary---The Economic and Statistical Significance of Stock Returns on Customer Satisfaction
According to Jacobson and Mizik [Jacobson, R., N. Mizik. 2009. The financial markets and customer satisfaction: Reexamining possible financial market mispricing of customer satisfaction. Marketing Sci.28(5) 810--819], excess stock portfolio returns for ...
Comments