Ontology of Bankruptcy Diffusion through Trade Credit Channel

It is widely believed that the whole economic system has exhibited an increasingly intertwined nature in the context of economic globalization and regional integration. With the increasing interactions among trading partners in a supply network, bankruptcy of a member firm may make others get into distressed situations. This kind of phenomena is called bankruptcy diffusion or bankruptcy contagion. In this paper, we focus on the bankruptcy diffusion in supply network through trade credit channel, which describes the phenomenon that the distressed customer’s default on its trade credit will make the financial crisis transmitted to suppliers. We have proposed a knowledge framework situated in the intelligent investment risk monitoring background. The knowledge framework is present to help shareholders, policy makers, and portfolio managers to identify candidate firms affected by a financially distressed firm. It consists of two components: 1) a formal ontology to represent static domain knowledge of bankruptcy diffusion phenomenon triggered by bankruptcy announcements; and 2) semantic rules to extend inference capability and enable automation of problem solving. An example is used to illustrate the ontological knowledge design for providing a preliminary evaluation. We believe that our approach may contribute to the literature in the following aspects: 1) at the conceptual level, we develop a formal, shared conceptualization utilizing ontology approach. The ontology provides structured representation of bankruptcy diffusion domain knowledge and lays a solid foundation for the analysis, design and deployment for future system development; and 2) at the implementation level, we represent the ontology using formal language Ontology