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Supporting a financially constrained supplier under spectral risk measures: The efficiency of buyer lending

Yanhai Li, Chaocheng Gu and Jinwen Ou

Transportation Research Part E: Logistics and Transportation Review, 2020, vol. 136, issue C

Abstract: This paper investigates the efficiency of buyer lending in a supply chain with a retailer and a capital-constrained supplier subject to spectral risk measures. We show that the retailer should always charge the supplier the lowest possible interest rate under the buyer lending scheme. The retailer is better off in the buyer lending scheme than in the bank lending scheme if he is risk-neutral or risk-seeking, regardless of the supplier’s risk attitude, internal capital, and bankruptcy costs. However, the retailer’s preference switches to bank lending as his risk-aversion increases to a certain level. A comprehensive comparative statics analysis is provided.

Keywords: Supply chain finance; Buyer lending; Capital constraint; Spectral risk measure; Bankruptcy cost (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.tre.2020.101894

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