Chinese Bank-enterprise Relationship In Transition Era Based On Game Theory

Bank and enterprise are two important equities in an economy. The relation of bank and enterprise relates to not only their efficiencies and risks, but also whole national economic growth and fluctuation. With the changes of economic system, the relation's influence to economic development becomes more and more bigger. Hence, the research of the bank-enterprise relation has vital theoretical and practical significance.This paper focuses on the bank-enterprise relation, especially the relation of China's national commercial banks and national enterprises.Firstly, it summarizes the bank and enterprise's origins, the role of banks in an economy, the developmental course of the bank-enterprise relation, the several modes of bank-enterprise relation, the theoretical research about this relation, and the development phases and problems of China's bank-enterprise relation. The fundamental models of game theory are also summarized and its application in this relation is discussed.Secondly, economic characteristics of transition economy is analyzed, the bank-enterprise relation's evolvements and its basic characteristics are discussed. According to whether the government interfere or not, the bank-enterprise relation in transition economy era is analyzed; the conclusion that the government's behaviors has critical influences on the games of banks and firms is drawn; the positive and negative effects of the bank-enterprise relation in transition economy era are evaluated.Thirdly, this paper applies adverse selection and moral risks theory into game theoretic analysis of the bank-enterprise relation in transition economy era. The game theory model to prevent the adverse selection and moral risks is constituted. The effects of adverse selection and moral risks could be alleviated to a certainty, but its role is subject to the limitation of national economic environment and legal environment.Fourthly, from the point of game theory, the effect of game of banks and firms on deflation is analyzed. State owned enterprises' low efficiencies and extensive losses laid hidden troubles to banks' non-performed assets. Facing the circumstance that firms can't refund the loans and lacking of sufficient legal safeguards, banks' best choice is not seeking to refund the enterprises' non-performed loans. This gives agame theory explanation for banks' non-performed assets. On the condition of mass non-performed assets and government's severe measures to control financial risks, banks have to grudge credits. Even the good projects can't get loans; investments decrease; the debts of firms go up; more loans can't be repaid, which become the non-performed assets. It furthers the formation of deflation trend and aggravates deflation. Banks' and firms' behaviors effect on deflation and banks' and firms' behavioral selection in term of deflation are also analyzed.