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| On the Amplifying Effect of Financial Moral Hazard in the Agricultural Supply Chain |
| PENG Lu
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| School of Finance, Southwestern University of Finance and Economics |
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Abstract The nature of agricultural production and the widespread information asymmetry easily trigger financial moral hazards resulting from random incidents. Consequentially, the moral hazards may lead to systemic financial risk through the economy of scale, the economy of scope, herding and fallacy of the agricultural supply chain. Based on this argument, this paper uses a sequential game and empirically shows the possibility of the amplification of moral hazards based on the decision-making of leading enterprises in an agricultural supply chain. To prevent the risk, commercial banks should cooperate with leading agricultural enterprises to adopt make-to-order production, strengthen closed-off management and actively integrate a cultural value system into the agricultural supply chain. In the meantime, macro-prudential and micro-prudential supervisions of the agricultural supply chain finance should be reinforced.
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Received: 02 May 2017
Published: 01 November 2018
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