Financing a Capital-Constrained Supply Chain under Risk Regulations: Traditional Finance versus Platform Finance

Jun Wu, Liyuan Yue, Na Li and Qianqian Zhang ()
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Jun Wu: School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China
Liyuan Yue: School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China
Na Li: School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China
Qianqian Zhang: School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China

Sustainability, 2024, vol. 16, issue 17, 1-25

Abstract: Small- and medium-sized enterprises (SMEs) frequently face challenges in obtaining financial assistance from traditional banks. Platform Supply Chain Finance (PSCF) has emerged as a promising solution for financing issues among SMEs, with an added focus on integrating sustainability aspects. This study focused on a two-tier supply chain as its primary research topic to find strategies to enhance supplier financial viability and improve the efficiency and profitability of the main manufacturing enterprise. In this study, we establish three distinct hypotheses corresponding to the three models involving supplier and manufacturer participation, encompassing parameters such as production batch size, pricing, and supply chain profit. First, it examined financing decisions through the lens of core enterprise-led platform finance. Second, it applied the Stackelberg game theory to investigate financing decisions in three distinct modes: traditional finance, platform internal finance, and external platform finance. Suppliers, manufacturers, and banks can be seen as participants in a Stackelberg game. In this game, suppliers act as leaders, making production and procurement decisions first, while manufacturers and banks act as followers, adjusting their behavior based on the suppliers’ decisions. Finally, it performed a comparative analysis of decisions and supply chain efficiency across these modes. When the risk regulation cost coefficient falls below a certain threshold, suppliers are willing to set up their own PSCF and there is an optimal level of risk regulation effort within the interval (0, 1). We compare platform finance with traditional finance and find that the traditional finance model maximizes profits for suppliers, while the external financing model maximizes profits for manufacturers and the overall supply chain profit. Findings provide insights for platforms, suppliers, manufacturers, and banks to implement optimal financing and channel structures to increase their profits and promote the sustainable development of the financial supply chain. In addition, future research on blockchain platform models would be highly meaningful.

Keywords: platform finance; risk regulations; Stackelberg game; capital constraint; small- and medium-sized enterprises; sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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