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The evolution of portfolio financing equilibrium in a risk-averse supply chain under a partial trade credit policy

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  • Zhen, Zhiyuan
  • Jiang, Lan
  • Yan, Qiang

Abstract

This paper considers a two-echelon supply chain consisting of one supplier and one retailer, where the retailer is a small and medium-sized enterprise constrained by both capital availability and risk aversion. To balance high default risks and low-order products, the supplier only offers partial trade credit financing (TCF) to its retailer, which needs to seek equity financing (EF) or bank credit financing (BCF) to collect the remaining funds. The findings show that high risk-averse behaviour makes a conservative ordering, while a high valuation level encourages more orders. Besides, the valuation level affects the financing equilibrium evolution between TCF-EF and TCF-BCF.

Suggested Citation

  • Zhen, Zhiyuan & Jiang, Lan & Yan, Qiang, 2024. "The evolution of portfolio financing equilibrium in a risk-averse supply chain under a partial trade credit policy," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001557
    DOI: 10.1016/j.frl.2024.105125
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