The Simulation Study on the Control of Credit Risk of the Enterprise Group Based on the Intensity of Affiliated Transactions

Yu Xia, Chao Xu, Danhui Guan, Zongfang Zhou

School of Economics and Management, University of Electronic Science and Technology of China, Chengdu, China.

DOI: 10.4236/me.2012.38119                

Abstract

Related party transactions make the credit risk proliferate rapidly in the network formed by the transactions. Not only it will be more difficult for the enterprise Groups to control themselves, but also it will be more challenging for the crediting commercial banks to monitor. In this paper, we built a theoretical model of the proliferation of credit risk based on the simplified model. Further, from the two basic factors that influence the intensity of related party transactions- the scale of enterprise Groups and the intensity of the related relationship, we did a simulation research. The study found: when the two basic factors are controlled in a reasonable range, enterprise Group's credit risk can be controlled at a lower level.

Keywords

Enterprise Group; Related Party Transactions; The Proliferation Of Credit Risk; Simulation

Conflicts of Interest

The authors declare no conflicts of interest.

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