The Roles of Bank and Trade Credits: Theoretical Analysis and Empirical Evidence

Cai, Gangshu; Chen, Xiangfeng; Xiao, Zhiguo

doi:10.1111/poms.12035

Cited by 252 publications

(124 citation statements)

References 50 publications

Supporting

Mentioning

117

Contrasting

Unclassified

Order By: Relevance

“…They conclude that a trade credit is preferable to a bank credit, seen from the supplier's point of view. Cai et al perform a similar research to Kouvelis and Zhao and draw the similar conclusions. Supplementing these studies, Jing and Seidmann studied a 2‐echelon supply chain composed of a manufacturer and a capital‐constrained retailer.…”

Section: Literature Reviewsupporting

confidence: 59%

Effects of risk aversion and decision preference on equilibriums in supply chain finance incorporating bank credit with credit guarantee

Yan

Liu

et al. 2017

Appl Stoch Models Bus & Ind

View full text Add to dashboard Cite

We constructed a Stackelberg game in a supply chain finance (SCF) system including a manufacturer, a capital‐constrained retailer, and a bank that provides loans on the basis of the manufacturer's credit guarantee. To emphasize the financial service providers' risks, we assumed that both the bank and the manufacturer are risk‐averse and formulated trade‐off objective functions for both of them as the convex combination of the expected profit and conditional value‐at‐risk. To explore the effects of the risk preferences and decision preferences on SCF equilibriums, we mathematically analyzed the optimal order quantities, wholesale prices, and interest rates under different risk preference scenarios and performed numerical analyses to quantify the effects. We found that incorporating bank credit with a credit guarantee can effectively balance the retailer's financing risk between the bank and the manufacturer through interest rate charging and wholesale pricing. Moreover, SCF equilibriums with risk aversion are highly affected by the degree of both the lender's and guarantor's risk tolerance in regard to the borrower's default probability and will be more conservative than those in the risk‐neutral cases that only maximize expected profit.

show abstract

Section: Literature Reviewsupporting

confidence: 59%

Effects of risk aversion and decision preference on equilibriums in supply chain finance incorporating bank credit with credit guarantee

Yan

Liu

et al. 2017

Appl Stoch Models Bus & Ind

View full text Add to dashboard Cite

show abstract

“…In addition, some literatures considered other respects in the bank financing model, for instance, [6] incorporated the firm's moral risk into the financing model, and analyzed the comparison between trade and bank credit for the supply chain. Cai et al [23] showed that bank credit is less effective than trade credit in mitigating double marginalization with relatively low production cost.…”

Section: Supply Chain Financementioning

confidence: 99%

A financing model with rebate contract in a capital-constrained supply chain

Zhan

2021

RAIRO-Oper. Res.

View full text Add to dashboard Cite

In a two-level supply chain that includes one supplier and one capital-constrained retailer, this paper investigates a new bank financing model (Model N), in which, the supplier requires the retailer to order a quantity that is not less than a specified minimum ordering quantity (MOQ), rebates the per unit excess that sells over the MOQ, and promises to provide a partial warranty for the bank credit risk if the revenue is below the bankruptcy level of the retailer with the MOQ. This study shows that retailer's optimal order quantity increases with MOQ level and decreases with rebate rate, while supplier's optimal wholesale price shows an opposite tendency. Compared to the traditional bank financing model (Model T), the model N with an appropriate rebate contract will result in a larger order quantity of retailer. Furthermore, model N would benefit the entire supply chain and a Pareto zone of MOQ (or rebate rate) exists, in which, model N outperforms model T for each player. The numerical experiments are performed to illustrate that with increasing the marginal production cost of supplier, the MOQ level is decreasing while rebate rate is increasing in the Pareto zone.

show abstract

“…Jing et al [10] and Jing and Seidmann [11] further compare the efficiency between BCF and TCF for a capital-constrained retailer, and it is found that when production cost is relatively low, TCF will be more effective than BCF in mitigating double marginalization. Cai et al [19] prove that BCF and TCF are either complementary or substitutable for a capitalconstrained retailer through both theoretical and empirical studies.…”

Section: Interface Of Operations and Financing Decisionsmentioning

confidence: 99%

Optimal Ordering and Pricing Policies for Seasonal Products: Impacts of Demand Uncertainty and Capital Constraint

Shi

Fung

Guo

2016

Discrete Dynamics in Nature and Society

View full text Add to dashboard Cite

With a stochastic price-dependent market demand, this paper investigates how demand uncertainty and capital constraint affect retailer's integrated ordering and pricing policies towards seasonal products. The retailer with capital constraint is normalized to be with zero capital endowment while it can be financed by an external bank. The problems are studied under a low and high demand uncertainty scenario, respectively. Results show that when demand uncertainty level is relatively low, the retailer faced with demand uncertainty always sets a lower price than the riskless one, while its order quantity may be smaller or larger than the riskless retailer's which depends on the level of market size. When adding a capital constraint, the retailer will strictly prefer a higher price but smaller quantity policy. However, in a high demand uncertainty scenario, the impacts are more intricate. The retailer faced with demand uncertainty will always order a larger quantity than the riskless one if demand uncertainty level is high enough (above a critical value), while the capital-constrained retailer is likely to set a lower price than the well-funded one when demand uncertainty level falls within a specific interval. Therefore, it can be further concluded that the impact of capital constraint on the retailer's pricing decision can be influenced by different demand uncertainty levels. Hindawi Publishing CorporationDiscrete Dynamics in Nature and Society decisions on ordering, pricing, and financing, which is not observed in existing literature. The main contributions and conclusions of this paper are as follows.(1) Studying Retailer's Integrated Decisions on Ordering, Pricing, and Financing. With introducing pricing decision into the "capital-constrained newsvendor" problem, this paper investigates the retailer's integrated ordering and pricing decisions in the presence of capital constraint. Results show that when market size is extremely small, the retailer will not borrow from the bank to order any quantity. Otherwise, it will borrow to order and its optimal order quantity and selling price can be uniquely determined.(2) Investigating the Impacts of Demand Uncertainty and Capital Constraint on Retailer's Optimal Ordering and Pricing Policies. Three models (i.e., the riskless model, uncertainty model, and uncertainty-underfunded model) are developed and in-depth comparisons of optimal solutions in three models are carried out to reveal how demand uncertainty and capital constraint affect retailer's integrated ordering and pricing policies. The problems are studied in a low and high demand uncertainty scenario, respectively, which is differentiated by an ingenious method, and plenty of conclusions are obtained through both theoretical analyses and numerical studies.The remainder of the paper is organized as follows. Section 2 presents the review of related literature. Section 3 describes the problem and provides the model notations and assumptions. Section 4 formulates three models and derives the optimal solutions. Sectio...

show abstract

The Roles of Bank and Trade Credits: Theoretical Analysis and Empirical Evidence

Cited by 252 publications

References 50 publications

Effects of risk aversion and decision preference on equilibriums in supply chain finance incorporating bank credit with credit guarantee

Effects of risk aversion and decision preference on equilibriums in supply chain finance incorporating bank credit with credit guarantee

A financing model with rebate contract in a capital-constrained supply chain

Optimal Ordering and Pricing Policies for Seasonal Products: Impacts of Demand Uncertainty and Capital Constraint

Contact Info

Product

Resources

About