Comparative analysis of risk control in logistics and supply chain finance under different pledge fashions

Yixue Li, Shouyang Wang, Gengzhong Feng and Kin Keung Lai

International Journal of Revenue Management, 2011, vol. 5, issue 2/3, 121-144

Abstract: Inventory pledge financing is the core mode of logistics and supply chain finance in China, which can effectively solve financial bottlenecks in supply chains and has significant scope to develop. However, it is seriously constrained by the level of risk control. Given the randomly fluctuant character of prices of pledged inventories, this paper analyses decisions of the core risk control indicator, i.e. the loan-to-value ratio in static pledge and dynamic pledge fashions. In static pledge, this paper adopts the risk estimation strategy of 'corporate and debt' and analyses the loan-to-value ratio decision of downside-risk-averse banks when distribution of inventory price at the end of the loan period follows general distribution and several special distributions. Based on the total value balance mode in dynamic pledge, this paper establishes a loan-to-value ratio decision model for downside-risk-averse banks when pledged inventory is a standard commodity. Then, this paper extensively analyses the characteristics of risk control in logistics and supply chain finance under different pledge fashions.

Keywords: logistics finance; supply chain finance; inventory financing; risk control; loan-to-value ratio; inventory pledge financing; China; downside-risk-averse banks; revenue management. (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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