Research On Firm Debt Financing And Bankruptcy Effect In Supply Chain Environment

Along with the increasing market competition,some firms are in financial distress because of poor management and even apply for bankruptcy.The tight linkage of information flow,logistics,and capital flow among firms in a supply chain network makes bankruptcy not only affect distressed firm,but also through the interaction of supply chain influences the operation decision-making and profits of its competitors,suppliers and other supply chain member firms,there by changing the market competition and the relationship between upstream and downstream firms.It also changed the bankruptcy risk and bankruptcy results of distressed firm.When firms have financial constraints and their own funds cannot meet their daily business activities,firms usually choose debt financing.The financial expenses not only affect the profits of firms,but also through the interaction of supply chains to change market competition,the choice of loan level is an important financial decision for the firm.In view of the above problems,this paper constructs a supply chain with two competing downstream firms with a common supplier that operate over two periods.It assumes that one of the downstream firms is in a financial distress and faces bankruptcy risks.It uses game models and numerical experiments to study the supply chain environment.How the firm's debt financing and bankruptcy decisions alter market competition and the relationship between firms.The specific research content is as follows:First,in order to quantify the impact of bankruptcy,a benchmark model without distress is established to study the optimal order,wholesale price decisions and profits of supply chain member firms in the homogeneous product market.It was found that the downstream firm's order quantity and profit were not affected by debt financing,while the wholesale price and supplier's profits were negatively related to the loan level.Secondly,we examine the impact of firm's debt financing andbankruptcy on competitors and suppliers when suppliers have weak pricing power and wholesale pricing is uniform pricing.After discovering distressed firm,the non-distressed firm have a predation effect on the market share's encroachment,leading non-distressed firm to benefit from the bankruptcy of the distressed firm,and the predation effect aggravates the pre-bankruptcy competition and makes the competitors more advanced in the first stage.However,because the debt interest rate of the bankrupt firm is suspended due to market competition during the reorganization of the distressed firm,when the probability of reorganization is extremely high,the profit of the distressed firm will be higher than that of the non-distressed firm.The supplier's profits are positively correlated with the probability of firm reorganization and the level of debt,and may benefit from the financial distress of downstream firm.Then,we study the impact of firm's debt financing and bankruptcy on competitors and suppliers when the supplier's pricing power is strong and the wholesale price is differential pricing.It is found that suppliers with differentiated pricing capabilities will provide distressed firm with significant wholesale price concessions to maintain downstream competition,thereby generating bail-out effects.Wholesale prices are less affected by debt financing and are more affected by the probability of reorganization.The bail-out effect makes the distressed firm more cost-advantaged after successful reorganization.Therefore,the bankruptcy of a firm may become a negative externality to its competitor.Finally,the model is extended to examine the impact of distressed firm debt financing and bankruptcy on the operation decisions and profits of supply chain member firms in differentiated product markets.The product replacement rate affects the specific value of the optimal quantity,but it does not affect the mechanism of debt financing and the two bankruptcy effects.This article combines the supply chain environmental research debt financing and bankruptcy effects,research content has a certain degree of practicality,in order to provide reference for the production and operationdecision-making of firms facing financial difficulties and other member firms in the supply chain.