IDEAS home Printed from https://ideas.repec.org/a/spr/jknowl/v16y2025i1d10.1007_s13132-024-02003-x.html
   My bibliography  Save this article

Enhancing Agricultural Credit Guarantees in China’s Agricultural Value Chain Through Relationship Contracts: A Study on Risk Prevention Mechanisms

Author

Listed:
  • Chao Zhang

    (Taiyuan University of Science and Technology
    Taiyuan University of Science and Technology)

Abstract

This research paper delves into the critical role of relationship contracts in mitigating the risk associated with agricultural credit guarantees within China’s complex agricultural value chain. Financial security is paramount for the stability of Chinese society, and this study identifies the fundamental mission of risk prevention in achieving this security. It underscores the significance of relationship contracts formed among agricultural entities in the value chain and the ensuing implications for agricultural credit guarantees. The paper explores various facets, including information asymmetry, the inadequacy of financial regulations, and the collateral challenges faced by farming entities. Through an extensive review of related literature, the research highlights the impact of relationship contracts on default risk, emphasizing the role of intermediary organizations in reducing transaction costs and mitigating performance risks. Moreover, it addresses the need to incentivize new agricultural entities to align their actions with business entities’ expectations. The theoretical framework proposes hypotheses, the first suggesting that relationship contracts have a positive impact on agricultural credit guarantee risk reduction. The second hypothesis examines the mediating effect of moral hazard on these contracts within the agricultural value chain. The research concludes that relationship contracts significantly enhance agricultural credit guarantees by fully or partially guaranteeing agricultural entities’ income, thus reducing risk. Policy implications include the standardization of relationship contracts, the establishment of a reputation mechanism, and the role of agricultural credit guarantee systems as intermediaries to enhance the stability and efficiency of long-term contractual relationships in the agricultural value chain. This study provides valuable insights for policymakers and stakeholders aiming to strengthen China’s agricultural credit guarantee system and promote financial security in the agricultural sector.

Suggested Citation

  • Chao Zhang, 2025. "Enhancing Agricultural Credit Guarantees in China’s Agricultural Value Chain Through Relationship Contracts: A Study on Risk Prevention Mechanisms," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 2650-2669, March.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:1:d:10.1007_s13132-024-02003-x
    DOI: 10.1007/s13132-024-02003-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13132-024-02003-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s13132-024-02003-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    2. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
    3. Amitabha Bhattacharyya & Abhijit Sinha, 2021. "Assessing the Performance of Primary Agricultural Credit Societies: A Non-traditional Multi-Dimensional Index Approach," Springer Books, in: Ananda S. & Dharmendra Singh (ed.), Financial Inclusion in Emerging Markets, pages 151-161, Springer.
    4. H. Holly Wang & Yanbing Wang & Michael S. Delgado, 2014. "The Transition to Modern Agriculture: Contract Farming in Developing Economies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1257-1271.
    5. Shrabanti Maity, 2023. "Financial inclusion also leads to social inclusion—myth or reality? Evidences from self-help groups led microfinance of Assam," Journal of Innovation and Entrepreneurship, Springer, vol. 12(1), pages 1-22, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. MARINI, Marco, 1996. "Property Rights and Market : Employee Privatization as a Cooperative Bargaining Process," LIDAM Discussion Papers CORE 1996023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Baarda, James R., 2003. "Current Law & Economics Debates: Tools for Assessing Fundamental Cooperative Changes?," 2003 Annual Meeting, October 29 31802, NCERA-194 Research on Cooperatives.
    3. Ugo Pagano, 2010. "Marrying in the Cathedral: A Framework for the Analysis of Corporate Governance," Chapters, in: Alessio M. Pacces (ed.), The Law and Economics of Corporate Governance, chapter 6, Edward Elgar Publishing.
    4. Cécile Cézanne, 2012. "Berle and Means," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 7, Edward Elgar Publishing.
    5. Andriakopoulos, Konstantinos & Ladas, Augoustinos & Andriakopoulos, Panagiotis, 2020. "Bank efficiency and leasing in U.S.A. banking system," MPRA Paper 112645, University Library of Munich, Germany.
    6. Scott Gehlbach & Konstantin Sonin & Ekaterina Zhuravskaya, 2010. "Businessman Candidates," American Journal of Political Science, John Wiley & Sons, vol. 54(3), pages 718-736, July.
    7. Van Wijk, Raymond & Nadolska, Anna, 2020. "Making more of alliance portfolios: The role of alliance portfolio coordination," European Management Journal, Elsevier, vol. 38(3), pages 388-399.
    8. Ariño, Africa & Reuer, Jeffrey J., 2004. "Alliance contractual design," IESE Research Papers D/572, IESE Business School.
    9. Roland Kirstein & Matthias Peiss, 2013. "Quantitative Machtkonzepte in der Ökonomik," FEMM Working Papers 130004, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    10. Yaron Leitner, 2004. "Financial networks: contagion, commitment, and private sector bailouts," Working Papers 02-9, Federal Reserve Bank of Philadelphia.
    11. Peter G. Klein & Michael E. Sykuta, 2010. "Editors’ Introduction," Chapters, in: Peter G. Klein & Michael E. Sykuta (ed.), The Elgar Companion to Transaction Cost Economics, chapter 1, Edward Elgar Publishing.
    12. Schmid, Andreas, 2007. "Incentive Compatibility and Efficiency in the contractual Insurer-Provider Relationship: Economic Theory and practical Implications: The Case of North Carolina," MPRA Paper 23311, University Library of Munich, Germany, revised 2008.
    13. Thorsten Beck & Patrick Behr, 2017. "Individual versus Village Lending: Evidence from Montenegro," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 67-87, November.
    14. Franklin Allen & Meijun Qian, 2025. "Alternative finance in the international business context: a review and future research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 56(1), pages 43-61, February.
    15. Dufhues, Thomas & Buchenrieder, Gertrud & Quoc, Hoang Dinh & Munkung, Nuchanata, 2011. "Social capital and loan repayment performance in Southeast Asia," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(5), pages 679-691.
    16. Hurrelmann, Annette, 2005. "Institutions and properties of the transaction: influences on land rental contract design in Poland," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 54(06), pages 1-8.
    17. Stefano Ciliberti & Simone Del Sarto & Angelo Frascarelli & Giulia Pastorelli & Gaetano Martino, 2020. "Contracts to Govern the Transition towards Sustainable Production: Evidence from a Discrete Choice Analysis in the Durum Wheat Sector in Italy," Sustainability, MDPI, vol. 12(22), pages 1-14, November.
    18. Kimmich, Christian & Fischbacher, Urs, 2016. "Behavioral determinants of supply chain integration and coexistence," Journal of Forest Economics, Elsevier, vol. 25(C), pages 55-77.
    19. Kim, Serena Y., 2020. "Institutional arrangements and airport solar PV," Energy Policy, Elsevier, vol. 143(C).
    20. M. Kabir Hassan, 2002. "The Microfinance Revolution and the Grameen Bank Experience in Bangladesh," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 11(3), pages 205-265, August.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jknowl:v:16:y:2025:i:1:d:10.1007_s13132-024-02003-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.