Green Credit Financing Equilibrium under Government Subsidy and Supply Uncertainty

Abstract

In this paper, we study the green credit financing equilibrium in a green supply chain (GSC) with government subsidy and supply uncertainty. The GSC system is composed of one manufacturer, two retailers, one bank, and the government. The manufacturer is subject to both supply uncertainty and limited capital. The manufacturer invests in the R&D of green products and borrows loans from the bank. The government subsidizes banks to encourage banks to provide loans to manufacturers with lower interest rates, which is termed “green credit financing”. The two retailers decide their order quantities with horizontal competition or horizontal cooperation. We first developed a Stackelberg model to investigate the green credit financing equilibriums (i.e., the interest rate of the bank, the manufacturer’s product green degree and wholesale price, and the retailers’ order quantity) under horizontal competition and horizontal cooperation, respectively. Subsequently, we analyzed how the subsidy interest rate, supply uncertainty, and supply correlation affect financing decisions regarding equilibrium green credit. We found that a high subsidy interest rate leads to a low interest rate of bank and the manufacturer can set a high level of green product and high wholesale price, while the retailers can set a high order quantity. Finally, we compared the green credit financing equilibriums under horizontal competition with those under horizontal cooperation using numerical and analytical methods. We found that, in general, the optimal decisions and profits of bank and SC members, consumer surplus, and social welfare under horizontal competition are higher than those under horizontal cooperation. The findings in this research could provide valuable insights for the management of capital-constrained GSCs with government subsidies and supply uncertainty in a competing market.

Green Supply Chain Finance Credit Market under Government Regulation: An Evolutionary Game Theory Analysis

“…Government regulation can incentivize supply chain participants to choose green product development, promote overall government benefits, and achieve sustainable development for multiple stakeholders. Wu and Shang [33] constructed a green supply chain system consisting of manufacturers, retailers, banks, and the government, and studied the equilibrium of green credit financing under horizontal competition and cooperation through Stackelberg game models and numerical analysis. They examined how government subsidies and supply uncertainty affect green credit financing decisions.…”

How Does Green Credit Policy Affect Sustainable Development Capacity of Enterprises in China?

“…In the process of economic transformation, government subsidies are regarded as the most direct and easily observed mode of action of the "supporting hand" of the government. As free funds transferred by local governments to enterprises, government subsidies can encourage enterprises to increase green innovation input, directly enhance corporate earnings, and improve corporate financial constraints, thus easing the negative impact of GCP implementation on the financing of enterprises with high levels of pollution and energy consumption (Wu and Shang, 2021). The introduction of the GCP may make it difficult for enterprises with high levels of pollution and energy consumption to cross the capital threshold.…”

Too Much of a Good Thing? The Impact of Government Subsidies on Incubator Services: Empirical Evidence from China

“…The effectiveness of government subsidies is another major research hotspot in academia, which has not reached a consensus due to different research objects, definitions of variables, and research methods. Some scholars believe that government subsidies bring positive signals, alleviate the pressure of external financing, stimulate enthusiasm for enterprise technology research and development, boost the innovation output of enterprises, and guide the direction of industrial development [18][19][20][21]; more innovation output wins market power for enterprises, significantly improves their profitability, and thus enhances their financial performance [22]. Some scholars have also found that government subsidies may cause some problems, such as rent-seeking behavior caused by enterprises taking advantage of information asymmetry or abuse of government subsidies [23].…”