Sub-pattern analysis of Chinese guarantee network

06/12/2018 ∙ by Yingli Wang, et al. ∙ 0

In this study, we investigate the evolution of Chinese guarantee networks from the angle of sub-patterns. First, we find that the mutual, 2-out-stars and triangle sub-patterns are motifs in 2- and 3-node subgraphs. Considering the heterogeneous financial characteristics of nodes, we find that small firms tend to form a mutual guarantee relationship and large firms are likely to be the guarantors in 2-out-stars sub-patterns. Furthermore, we conduct a dynamic study on 15 sub-patterns, which consist of 2- and 3-node sub-patterns, and find that the subgraphs are highly influenced by the 2008 financial crisis and Chinese stimulus program. More concretely, during the financial crisis, the mutual guarantee relationship decreases, due to the bankruptcy of small firms. Additionally, local interconnection (mutual and triangle sub-patterns) is established with the significant increase in the initiation of the stimulus program. Another important study we conduct is the discovery of functionally important sub-patterns. On the one hand, mutual and some triangle sub-patterns (containing mutual guarantee) are risky patterns with high default probability. However, cyclic triads and fully connected 3-node sub-patterns are most stable in the default process due to the peer monitoring between firms. On the other hand, sub-patterns of edge and 2-out-stars are with lowest contagion capability. Our functional sub-patterns could shed light on the optimal structure design of guarantee networks to reduce the default and contagion probability.

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