Trade credit insurance, capital constraint, and the behavior of manufacturers and banks

Li, Yongjian; Zhen, Xueping; Cai, Xiaoqiang

doi:10.1007/s10479-014-1602-x

Cited by 67 publications

(47 citation statements)

References 28 publications

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“…Li et al. () investigate the influences of trade credit insurance on manufacturer's decisions, their results show that both bank and manufacturer are better off if trade credit insurance exists. Chen et al.…”

Section: Literature Reviewmentioning

confidence: 99%

Optimal carbon reduction level and ordering quantity under financial constraints

Cao

et al. 2018

Int Trans Operational Res

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Carbon tax policy is widely adopted by many countries to curb carbon emissions. In the context of carbon tax policy, firms have more incentive to improve carbon reduction levels by reducing their carbon tax costs. However, firms need to bear carbon reduction costs that may cause shortage of capital. Thus, firms may face problems of financial constraints, which may demotivate firms to produce greener products. To address the decision-making challenges of firms in the contexts of carbon tax policy and financial constraints, we consider a supply chain with a manufacturer who produces green products and a retailer who sells these products. Our study develops five models to investigate the two firms' optimal wholesale price, carbon reduction level and ordering quantity, according to the manufacturer and retailer with or without financial constraints. Our goal in this study is to explore how carbon tax policy and banks' interest rates affect the profits of the two firms, supply chain and consumer surplus. Certain managerial insights are obtained as follows. We demonstrate that carbon tax policy and banks' interest rates demotivate the manufacturer to produce greener products and demotivate the retailer to order more products. If the interest rate to the manufacturer (retailer) is relatively low, then the manufacturer with financial constraint benefits (harms) the consumers compared with the retailer with financial constraint. Importantly, our analysis suggests that carbon tax policy harms the firms but benefits consumers, and the government in some conditions should reduce unit carbon tax.

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Section: Literature Reviewmentioning

confidence: 99%

Optimal carbon reduction level and ordering quantity under financial constraints

Cao

et al. 2018

Int Trans Operational Res

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“…Following the convention in some supply chain management literature (e.g., ), we assume that the retailer and the supplier have the same belief about the demand distribution. Similar to Wang and Luo and Li et al , the bank and the insurer is assumed to have the same belief about the demand distribution, which is reasonable because the bank and the insurer can share the borrower's risk information via the financial information sharing platform. Let f (•), F (•), and

\overset{F}{true} ((), •)

as PDF, CDF, and CCDF of the retailer's and the supplier's belief about the demand distribution.…”

Section: Model Description and Assumptionmentioning

confidence: 99%

“… developed a novel approach to integrate inventory optimization techniques with insurance optimization. Li et al examined the role of trade credit insurance from a credit granter's perspective. Departing from these papers, we focus on discussing and analyzing how a capital‐constrained retailer uses credit insurance as a financial guarantee tool to enlarge the credit limited by a risk‐averse bank.…”

Section: Introductionmentioning

confidence: 99%

Optimal inventory and insurance decisions for a supply chain financing system with downside risk control

Jin

Luo

2016

Appl Stoch Models Bus & Ind

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This research considers a supply chain financing system consisting of a capital‐constrained retailer, a supplier and a risk‐averse bank. The retailer may be subject to credit limit because of the bank's downside risk control, and hence, credit insurance should be needed to enhance his financing ability. This paper develops a mathematical optimization model by incorporating insurance policy into the well‐known newsvendor financing model. The optimal inventory and insurance decisions under different scenarios, that is, no insurance, insurance with symmetric information and insurance with asymmetric information, are derived. This work also discusses how the retailer's capital level, the bank's risk aversion, and the insurer's loading factor affect the optimal inventory and insurance decisions. The results show that the retailer will use credit insurance if he is sufficiently capital‐constrained or the insurer's risk loading factor is low enough. Moreover, credit insurance can bring Pareto improvement to the supply chain financing system, which verifies the prevalence of credit insurance in practice. Several numerical experiments are presented to examine the sensitivities of key parameters. Copyright © 2016 John Wiley & Sons, Ltd.

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“…Lai et al [29] discussed short-term bank financing issues with bankruptcy costs and proposed three inventory risk sharing modes: preorder, consignment, and a combination mode. Li et al [30] incorporated trade credit insurance in the Stackelberg game between a manufacturer and a risk-averse bank. Differently, the assumption here is that the newsvendor is risk averse as he pursues long-time survival.…”

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confidence: 99%

“…Some researchers, e.g., [7], [8], [32], and [33], compared trade credit and bank financing with different assumptions. In [30], the bank market was assumed to be perfectly competitive. Zhou and Groenevelt [7] assumed that the bank is a monopoly with the goal of maximizing profit.…”

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confidence: 99%

Supply Chain Loss Averse Newsboy Model With Capital Constraint

Zhang

Liang

et al. 2016

IEEE Trans. Syst. Man Cybern, Syst.

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The financing of supply chains involves decisions by supply chain members as well as by lending institutions. The optimality of lending decisions in this environment depends on the loss aversion on the part of supply chain members as well as the availability of capital. The purpose of this paper is to understand the impact of capital constraint and loss aversion on operational decisions in supply chains. Traditional models have the bank external to the supply chain, with the bank's interest rate exogenous. This research concerns a capital-constrained supply chain with the manufacturer selling to a loss averse newsvendor-like retailer, and a bank financing both the manufacturer and the retailer. The existence of supply chain finance equilibrium is proven by the use of Stackelberg game analysis. The best pricing and ordering decisions of both manufacturer and retailer are determined, and results demonstrate how these key decisions are influenced by their initial capital and the bank's financial decisions. For instance, the optimal order quantity increases or decreases with initial capital, and it is interesting that bankruptcy protection encourages a cash-constrained retailer to adopt an aggressive ordering strategy. Moreover, it is shown that the retailer's loss aversion has a significant impact on the capital constraint problem. With an increase in loss aversion, the required initial working capital decreases. Loss aversion can even change the retailer's situation from one of capital constraint to one of capital sufficiency. An extension with double orders is given for comparison. Numerical examples are given to demonstrate the impact of initial capital and loss aversion on the optimal decisions and some other managerial insights are discussed.Index Terms-Capital constraint, loss aversion, pricing and revenue management, risk management, supply chain management.

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Trade credit insurance, capital constraint, and the behavior of manufacturers and banks

Cited by 67 publications

References 28 publications

Optimal carbon reduction level and ordering quantity under financial constraints

Optimal carbon reduction level and ordering quantity under financial constraints

Optimal inventory and insurance decisions for a supply chain financing system with downside risk control

Supply Chain Loss Averse Newsboy Model With Capital Constraint

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