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Financing preference and the role of credit insurance in a green supply chain

Bo Li, Zijia Du and Minxue Wang

Managerial and Decision Economics, 2022, vol. 43, issue 8, 3882-3897

Abstract: As environmental pollution becomes more serious, green supply chain management has gradually become a research hotspot. However, the fact is often ignored that many companies are small‐ and medium‐sized enterprises. They do not have enough capital to make green decisions. This paper studies a green supply chain financing system, including a green manufacturer and a capital‐constrained retailer and analyzes the effect of credit insurance on financing and product's green level. We consider consumers have a green preference. The retailer can finance through two methods: bank credit financing and trade credit financing. We find the manufacturer's financing preference is closely related to unit production cost and green investment cost coefficient. When the unit production cost is low, and the green investment cost coefficient is high, or the unit production cost is high, and the green investment cost coefficient is in the middle threshold, the manufacturer prefers to actively provide trade credit financing for the capital‐constrained retailer. And, in the former case, trade credit financing can also enhance the green level of the supply chain. Finally, we also find that credit insurance can mitigate the default risk of the retailer and help the manufacturer improve profits but cannot improve the product's green level.

Date: 2022
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