A Credit Risk Contagion Intensity Model of Supply Chain Enterprises under Different Credit Modes

Yuhao Wang, Jiaxian Shen, Jinnan Pan and Tingqiang Chen ()
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Yuhao Wang: School of Economics and Management, Nanjing Tech University, Nanjing 211816, China
Jiaxian Shen: School of Economics and Management, Nanjing Tech University, Nanjing 211816, China
Jinnan Pan: School of Economics and Management, Nanjing Tech University, Nanjing 211816, China
Tingqiang Chen: School of Economics and Management, Nanjing Tech University, Nanjing 211816, China

Sustainability, 2022, vol. 14, issue 20, 1-26

Abstract: The rapid development of theoretical and practical innovations in corporate finance driven by supply chain finance has exacerbated the complexity of credit default risk contagion among supply chain enterprises. Financial risks in the supply chain greatly hinder its sustainable development; thus, strengthening financial risk management is necessary to ensure the sustainability of the supply chain. Based on the single-channel and dual-channel credit financing models of retailers in the supply chain, the purpose of this paper was to construct a model of the intensity of credit default risk contagion among supply chain enterprises under different credit financing models, and investigate the influencing factors of credit risk contagion among supply chain enterprises and its mechanism of action through a computational simulation system. The results were as follows: (1) there was a positive relationship between the production cost of suppliers and the contagion intensity of the supply chain credit default risk, and the contagion effect of the supply chain credit default risk increased significantly when both retailers defaulted on trade credit to suppliers; (2) the market retail price of the product was negatively related to the contagion intensity of the supply chain credit default risk, and the contagion intensity of the supply chain credit default risk increased significantly when both retailers defaulted on trade credit to the supplier; (3) the intensity of credit default risk contagion in the supply chain was positively correlated with both the commercial bank risk-free rate and the trade credit rate, and retailers’ repayment priority on trade credit debt was negatively correlated with suppliers’ wholesale prices and positively correlated with retailers’ order volumes, with retailers’ repayment priority positively affecting retailers’ bank credit rates and negatively affecting suppliers’ bank credit rates; and (4) retailers’ repayment priority on trade credit debt was negatively correlated with the intensity of supply chain credit default risk contagion, and the lower the retailer’s bank credit limit, the higher the trade credit limit, and the stronger the credit default contagion effect in the supply chain.

Keywords: supply chain finance; trade credit financing; bank credit financing; credit default; contagion intensity (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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