Research on impact of moral hazard on individual credit risk

Abstract

Moral hazard is a prominent issue in personal behaviour of credit risk management. This paper considered the bank loan interest rates as the control variables. It analysed the relationship between the default probability and the probability of the occurrence of moral hazard of individuals and the impact of moral hazard to individual credit risk mechanism from the theoretical level. The results show that: (1) the bank loan rates have strong effects on both the moral hazard of personal loan and credit risk. (2) The relationship of the probability of the occurrence of moral hazard of individuals and the default rate of individuals is generally non-linear. However, there is a constraint interval of the default rate. When that interval is determined, the probability of the occurrence of moral hazard of individuals and the default rate of individuals has linear relationship, and the bigger the interval is, the smaller probability of the occurrence of moral hazard is. © 2014 Published by Elsevier B.V.