Core–periphery structures and financial risk contagion in evolving interfirm credit guarantee networks

Interfirm credit guarantees serve as a critical mechanism for firms to secure low-interest bank loans by enhancing their creditworthiness. However, this practice also creates a channels through which financial risks can spread, particularly when the guaranteed firm defaults. This paper introduces an evolving network model that incorporates financial risk contagion within an interfirm credit guarantee network. We examine how the structure of the network evolves under the influence of financial risk contagion and investigate the role of firms’ behaviors and operational activities in exacerbating or mitigating risk contagion. Our simulation findings indicate that under financial risk contagion, interfirm credit guarantee networks exhibit core–periphery structures that emerge and evolve. However, these structures deviate from an idealized core–periphery configuration. Additionally, both the cumulative indegree and outdegree distributions of the network follow a power-law distribution and maintain dynamic stability throughout the risk contagion process. Moreover, we find that defaults of core firms lead to a higher failure rate compared to those of peripheral firms, indicating that core firms play a more significant role in enhancing network resilience than their peripheral counterparts. Further analysis reveals that a firm’s operational activities have a significant impact on the propagation of risk within the interfirm credit guarantee network. In contrast, the level of a firm’s risk aversion exerts minimal influence on the network’s resilience to risk contagion.