Research On Optimal Financing Strategies In A Capital-constrained Supply Chain Under CVaR Criterion

Small and medium-sized enterprises(SMEs)have the characteristics of small operation scale,few collateral items and strong development uncertainty,which cause the problem of poor capital turnover.Therefore,they face the dilemma of ‘difficult financing and expensive financing’.Supply chain finance is an important means of solving this dilemma.In supply chain finance,partial credit guarantee financing(PCG)and trade credit financing(TCF)are widely used to help enterprises with financial constraints.However,in these two financing schemes,core enterprises will bear part(or all)of the SMEs’ bankruptcy risk in practice due to the provision of partial credit guarantees(or direct financing).Therefore,core enterprises take their risk-averse level into account in the actual decision-making process.This paper focuses on both PCG and TCF schemes,which studies each supply chain member’s equilibrium solution and optimal financing strategy under the assumption of demand distributions with an increasing failure rate(IFR),by the use of the conditional value-at-risk criterion.The main contributions of this paper are as follows.(1)This paper firstly derives analytic expressions of a risk-averse supplier’s optimal decisions for IFR demand distributions,which not only extends extant research conclusions into general cases,but also provides a theoretical basis for supplier’s pricing decision in practice.(2)This paper proves that the optimal wholesale price decreases in the risk-averse level and initial capital,and increases in the credit guarantee ratio.When the supplier is more risk-averse,a higher wholesale price will be set to decrease the retailer’s order quantity,thereby reducing the bankruptcy risk.Moreover,when the retailer’s initial capital is zero,the supplier will raise the wholesale price to the market selling price,to seize the retailer’s total revenue.These conclusions clarify the risk transmission mechanism of supply chain members and have guilding implications for controlling the default risk of SMEs appropriately.(3)This paper derives optimal financing strategies for both the supplier and the retailer under different values of risk-averse level.The results show that a risk-averse supplier is more likely to provide PCG than a risk-neutral supplier.However,the supplier tends to provide TCF with the increase of the credit guarantee ratio and initial capital.This paper has several managerial implications.First,it suggests that managers should pay attention to the risk-averse level of core enterprises,and encourage core enterprises to make decisions with full consideration of risks,because the risk-averse level can distort the wholesale price,which further distorts the order quantity and reduces retailers’ default risk in practice.In turn,the stability of the entire supply chain will be improved,and all members benefit from risk-averse behavior of core enterprises.Second,managers should proactively seek win-win strategies.Offering win-win strategies can induce SMEs to become a community of shared interests with core enterprises,which also provides higher profits for SMEs.Therefore,the supplier and retailer have closer strategic synergy with each other,and the supply chain obtains a long-term operation mechanism from win-win strategies.