Mixed financing strategies for capital-constrained retailer in the Chinese financial market

Chuanxin Xia, Yujie Xiao, Wenyan Zhuo, Yu Jen Hsiao

Research output: Contribution to journalArticle

Abstract

Retailers in supply chains usually deal with the problem of capital shortage by obtaining financing from the Chinese financial market. Examining the financing requirement of capital-constrained retailers, this paper studies the optimal decisions of the supplier and retailer in the supply chain, who are both risk-neutral decision-makers under wholesale price contracts. We assume that the retailer may obtain financing from a bank, the supplier and investors. Thus, the retailer can adopt two mixed financing modes: mixed financing of a bank and equity credit and mixed financing of trade and equity credit. We obtain equilibrium decisions under the two financing modes. By comparing the equilibrium results, we find that the mixed financing of trade and equity credit exhibits the only financing equilibrium. A Pareto interval of the wholesale price exists such that both the supplier and retailer can obtain higher profits with the mixed financing of trade and equity credit than the mixed financing of bank and equity credit. Finally, we present a numerical analysis to support our results.

Original languageEnglish
Article number101395
JournalPacific Basin Finance Journal
Volume63
DOIs
Publication statusPublished - Oct 2020

Keywords

  • Bank credit
  • Capital-constrained retailer
  • Equity financing
  • Risk-neutral
  • Trade credit

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Mixed financing strategies for capital-constrained retailer in the Chinese financial market'. Together they form a unique fingerprint.

  • Cite this