Professor Guochao Yang, a researcher of the base, has published a collaborative paper titled "The Institutional Incentives of Systemic Financial Risk in Bond Market: Evidence from Cross-Default Clauses" in The Journal of World Economy (Issue 12, 2024).

This issue features eight empirical studies spanning critical domains such as international trade, global economic trends, fiscal policy and taxation, institutional reform, financial markets, corporate innovation and productivity, renewable energy, and housing economics. These articles reflect cutting-edge scholarship and provide actionable insights for policymakers and industry stakeholders, highlighting their substantial academic contributions and real-world relevance.

Abstract:

The majority of extant literature examines the sources of systemic financial risk in the bond market through the lens of specific economic linkages, this paper builds upon the fact that bond default risk is contagious across industries and regions. It further proves that cross-default clauses serve to exacerbate systemic financial risk in the bond market by facilitating the further dissemination of default risk that accompanies individual defaults within the same industry and region to newly issued bonds. The amplification of risk generated by cross-default clauses is more pronounced when a greater number of debt default entities and a wider range of defaults are stipulated in the cross-default clauses. In particular, defaults in the supply chain, as well as defaults of top enterprises in the industry and the region, serve to further disseminate the default risks along the cross-default clauses to the newly issued bonds. Further analysis also indicates that defaults on bonds within the same industry and region result in creditors reducing long-term credit facilities to debt issuers with cross-default clauses. Additionally, creditors in the supply chain reduce the commercial credit of such firms.

Keywords：cross default; bond default; risk contagion; systemic financial risk

Link：https://manu30.magtech.com.cn/sjjj/CN/Y2024/V47/I12/136

Teacher profile

Guochao Yang, Professor of the school of accounting, Zhongnan University of economics and law, director of the big data center of "income distribution and modern financial discipline innovation and talent introduction base" of the Ministry of education and the Ministry of science and technology, and Wenlan young scholar. The papers have been published in (including to be published) Economic Research (4), management world, China Economic Quarterly (4), world economy, financial research, accounting research (2), China Journal of Accounting Studies (2) and other top-level domestic academic journals. He has won the 2017 China Financial Research Conference (CFRC) best paper award, the first prize of the 12th Hubei social science outstanding achievement award, the first prize of the 16th Wuhan social science outstanding achievement award, the "top ten papers" of the first China empirical research (Finance) paper competition, the special prize of the annual accounting excellent paper of Hubei Accounting Society (twice), and the 2019 national MPAcc excellent teaching cases. He presided over the National Natural Science Foundation of China, the humanities and Social Sciences Foundation of the Ministry of education and a number of projects in Hubei Province.