Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM): Recent Contributions and Future Directions

Babich, Volodymyr; Kouvelis, Panos

doi:10.1287/msom.2018.0706

Cited by 84 publications

(65 citation statements)

References 79 publications

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“…The present study also belongs to the nascent literature on the operations–finance interface, including joint operational and financial risk management of firms, supply chain finance, and contracts between the firm and its financiers/investors (Zhao and Huchzermeier, 2015; Babich and Kouvelis, 2018; Ivanov, 2018). Some investigators have studied capital‐constrained firms’ purchasing decisions together with financial considerations such as discounting or factoring (Choi, 2016; Li and Gu, 2018).…”

Section: Literature Reviewmentioning

confidence: 99%

How does a bank's involvement interplay with a firm's capacity investment? An analysis and comparison of different consortium structures

Wang

Wen

Yip

et al. 2020

Int Trans Operational Res

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As nonrecourse project finance (rather than financing on a sovereign basis) is becoming more prevalent worldwide, financing institutions have to collaborate more closely with firms to optimize capacity-investment and financing decisions. Under this background, this paper presents a stylized Stackelberg games model, taking into account the firm's capacity investment as well as the bank's interest rate and funding ratio decisions. Consortium structures between bank and firm are formalized into five modes based on industry practice, namely, the integrated consortium, pure shareholder funding, bank as leader, full coordination, and bank as follower. The optimality and equilibrium of each of the five modes are analytically derived, and their existence and uniqueness are demonstrated. Valuable economic insights are obtained through both modeling analysis and numerical experiments, with the main findings including the following: (i) a lack of bank financing leads to insufficient capacity investment and poor consortium performance; (ii) interest rate and funding ratio play important but different roles in the bank's risk management; (iii) the bank's proactivity in leading and coordinating the consortium is critical for the two parties' overall performance; and (iv) if the bank is the follower, the firm's capacity decision is irrelevant to the bank's loan contract, and the consortium cannot be coordinated to the first-best level of performance.

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Section: Literature Reviewmentioning

confidence: 99%

How does a bank's involvement interplay with a firm's capacity investment? An analysis and comparison of different consortium structures

Wang

Wen

Yip

et al. 2020

Int Trans Operational Res

View full text Add to dashboard Cite

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“…Babich and Kouvelis () conduct a compressive literature review on the interface of finance, operations, and risk management, and summarize that current research in this domain includes SCF (trade credit and buyer‐intermediated finance and their effects on supply chain performance), agency problems (risk shifting and managerial short‐termism and their influence on operational decisions), contracting between the firm and its investors and how it alters contracting with supply chain partners, and supply risk management with commodity price fluctuations. Within the literature related to SCF, several clusters are focused on operational decisions, trade credit, and contract coordination in SCF.…”

Section: Literature Reviewmentioning

confidence: 99%

Influences of supply chain finance on the mass customization program: risk attitudes and cash flow shortage

Guo

Liu

2019

Int Trans Operational Res

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In recent years, to satisfy diversified customer needs in the target market, an increasing number of brands have launched mass customization (MC) programs as one of their core operations strategies. The production process flexibility and personalization degree of customized products (i.e., the MC products) have thus become key to the success of MC schemes. In the meantime, however, considering the high market uncertainty in consumer preferences and the challenges from the production process, there are plenty of risks in MC operations. Hence, in this paper we develop a game-theoretic model consisting of an MC brand and an upstream manufacturer to identify the influences of supply chain finance (SCF) on MC programs. The influences brought by the risk attitudes of both MC brand and manufacturer are analyzed. Besides, an extra interest rate for raising the working capital for production (e.g., from the bank) at the manufacturing level is also considered in this paper to address the impact of cash flow shortage. We find that when the positive sensitivity of the market demand with respect to the modularity level of the MC product is sufficiently high, the optimal product modularity level of the MC product increases with the MC brand's degree of risk averse. In addition, it can also be observed that when both the market demand's positive sensitivity to the modularity level of the MC product and the MC brand's opportunity cost rate for placing the advance order are sufficiently high, any increase in the risk-averse degree of the MC brand or the manufacturer will lower the manufacturer's optimal wholesale price of the MC product as well as the MC brand's optimal rate of the advance order. Furthermore, the higher the interest that the manufacturer needs to pay (such as to the bank) for raising the working capital for the MC production process, the lower the optimal wholesale price of each finished MC product will be to help the manufacturer raise more money through the advance order placed by the MC brand. These observations complete the findings in the extant literature and provide important managerial insights into managing MC operations.

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“…One of the benefits of SCF that the literature has widely highlighted is the reduction of cost of financing (Van der Vliet et al 2015;Iacono et al 2015;Gelsomino et al 2016b;Zheng and Zhang 2017;Ding et al 2017;Babich and Kouvelis 2018;Yu and Zhu 2018;Yang et al 2018). It helps to facilitate offering finance at a lower cost to the SC partners, who generally are not privileged to receive capital at lower cost.…”

Section: The Outcome Of Supply Chain Financingmentioning

confidence: 99%

“…It leads to financial service providers extending finance at lower interest rates. Supply chain finance not only facilitates a lower cost of financing, it also helps reduce the overall cost in the supply chain, e.g., cost of producing and delivering goods/services (Blackman and Holland 2006;Iacono et al 2015;Gelsomino et al 2016b;Jiang et al 2016;Liu and Wen 2017;Babich and Kouvelis 2018). SCF has been widely touted to offer solutions to the problems faced by SMEs in availing finance; the literature on SCF revealed that SCF improves the accessibility to funds, particularly for smaller SC partners (Suayb Gundogdu 2010; Wang et al 2012;Yan and Sun 2015;Hofmann and Zumsteg 2015;Liu and Wen 2017;Ding et al 2017;Chen and Wen 2017;Zheng and Zhang 2017;Li et al 2011).…”

Section: The Outcome Of Supply Chain Financingmentioning

confidence: 99%

“…The researcher also stated that the objective of SCF is to optimise financing across borders to decrease the cost of capital and increase the speed of cash flows. Further, SCF is defined as "the use of financing and risk mitigation practices and techniques to optimise the management of the working capital and liquidity invested in supply chain processes and transactions" (Global Supply Chain Finance Forum n.d.; Babich and Kouvelis 2018). Thus, this definition added a dimension of risk mitigation to supply chain finance.…”

Section: Introductionmentioning

confidence: 99%

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Factors, Outcome, and the Solutions of Supply Chain Finance: Review and the Future Directions

Marak

Pillai

2018

JRFM

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In the current highly competitive and fast-changing business environment, in which the optimisation of all resources matters, creating an efficient supply chain is crucial. Earlier studies on supply chains have focussed on aligning product/services and information flows while neglecting the financial aspects. Due to this, in recent times, importance has been given to align financial flows with the other components of the supply chain. The interest in supply chain finance rose after the financial crisis when the bank loans declined considerably, as the need for better management and the optimisation of working capital became obvious. This paper reviews the articles on supply chain finance based on three themes—factors, outcomes, and solutions—while at the same time providing directions for future research on supply chain finance. This article is unique, as it investigates the factors affecting supply chains according to the existing literature. It also sheds light on the outcome of the supply chain without limiting the discussion only to the benefits. Further, it addresses the question: what are the solutions constituting supply chain finance?

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Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM): Recent Contributions and Future Directions

Cited by 84 publications

References 79 publications

How does a bank's involvement interplay with a firm's capacity investment? An analysis and comparison of different consortium structures

How does a bank's involvement interplay with a firm's capacity investment? An analysis and comparison of different consortium structures

Influences of supply chain finance on the mass customization program: risk attitudes and cash flow shortage

Factors, Outcome, and the Solutions of Supply Chain Finance: Review and the Future Directions

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