The evolution of portfolio financing equilibrium in a risk-averse supply chain under a partial trade credit policy

Zhiyuan Zhen, Lan Jiang and Qiang Yan

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: This paper considers a two-echelon supply chain consisting of one supplier and one retailer, where the retailer is a small and medium-sized enterprise constrained by both capital availability and risk aversion. To balance high default risks and low-order products, the supplier only offers partial trade credit financing (TCF) to its retailer, which needs to seek equity financing (EF) or bank credit financing (BCF) to collect the remaining funds. The findings show that high risk-averse behaviour makes a conservative ordering, while a high valuation level encourages more orders. Besides, the valuation level affects the financing equilibrium evolution between TCF-EF and TCF-BCF.

Keywords: Supply chain financing; Partial trade credit; Risk-averse behaviour; Valuation level; Portfolio financing equilibrium (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001557

DOI: 10.1016/j.frl.2024.105125

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