IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v208y2019icp383-399.html
   My bibliography  Save this article

Financing preferences and performance for an emission-dependent supply chain: Supplier vs. bank

Author

Listed:
  • Cao, Erbao
  • Du, Lingxia
  • Ruan, Junhu

Abstract

Many small and middle-sized enterprises (SMEs) with capital constraints have two primary short-term financing modes: internal financing (supplier) and external financing (bank). We consider an emission-dependent supply chain with one supplier and one emission-dependent manufacturer that are capital-constrained and in need of short-term financing. We investigate the financing preferences of the supply chain from a competitive bank or supplier when demand is uncertain and consumers have low-carbon preferences. Under the cap-and-trade system, we show that the existence of investments in carbon abatement will have no impact on the selection of financing mode. We find that the supplier's trade credit financing serves as a unique financing equilibrium for manufacturers regardless of whether investments in carbon abatement are considered. Irrespective of the chosen financing equilibrium, if a manufacturer chooses to invest in carbon abatement, the dominant supplier will offer a wholesale price to prompt the manufacturer to choose the largest feasible carbon emission reduction and maximize his profit. In addition, we present a set of numerical analyses to compare the results of different financing modes and the financing equilibrium with and without carbon abatement, and we analyze the impacts of key parameters on the performance of supply chain members.

Suggested Citation

  • Cao, Erbao & Du, Lingxia & Ruan, Junhu, 2019. "Financing preferences and performance for an emission-dependent supply chain: Supplier vs. bank," International Journal of Production Economics, Elsevier, vol. 208(C), pages 383-399.
    • Handle: RePEc:eee:proeco:v:208:y:2019:i:c:p:383-399
    DOI: 10.1016/j.ijpe.2018.08.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527318303013
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2018.08.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chern, Maw-Sheng & Pan, Qinhua & Teng, Jinn-Tsair & Chan, Ya-Lan & Chen, Sheng-Chih, 2013. "Stackelberg solution in a vendor–buyer supply chain model with permissible delay in payments," International Journal of Production Economics, Elsevier, vol. 144(1), pages 397-404.
    2. Arijit Bhattacharya & Prasanta Kumar Dey & William Ho, 2015. "Green manufacturing supply chain design and operations decision support," International Journal of Production Research, Taylor & Francis Journals, vol. 53(21), pages 6339-6343, November.
    3. Martin Achtnicht, 2012. "German car buyers’ willingness to pay to reduce CO 2 emissions," Climatic Change, Springer, vol. 113(3), pages 679-697, August.
    4. Gérard P. Cachon, 2014. "Retail Store Density and the Cost of Greenhouse Gas Emissions," Management Science, INFORMS, vol. 60(8), pages 1907-1925, August.
    5. Arup Daripa & Jeffrey Nilsen, 2011. "Ensuring Sales: A Theory of Inter-firm Credit," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 245-279, February.
    6. James Kroes & Ravi Subramanian & Ramanath Subramanyam, 2012. "Operational Compliance Levers, Environmental Performance, and Firm Performance Under Cap and Trade Regulation," Manufacturing & Service Operations Management, INFORMS, vol. 14(2), pages 186-201, April.
    7. Xiao, Shuang & Sethi, Suresh P. & Liu, Mengqi & Ma, Shihua, 2017. "Coordinating contracts for a financially constrained supply chain," Omega, Elsevier, vol. 72(C), pages 71-86.
    8. Du, Shaofu & Zhu, Lili & Liang, Liang & Ma, Fang, 2013. "Emission-dependent supply chain and environment-policy-making in the ‘cap-and-trade’ system," Energy Policy, Elsevier, vol. 57(C), pages 61-67.
    9. Yang, Honglin & Zhuo, Wenyan & Shao, Lusheng, 2017. "Equilibrium evolution in a two-echelon supply chain with financially constrained retailers: The impact of equity financing," International Journal of Production Economics, Elsevier, vol. 185(C), pages 139-149.
    10. Panos Kouvelis & Wenhui Zhao, 2016. "Supply Chain Contract Design Under Financial Constraints and Bankruptcy Costs," Management Science, INFORMS, vol. 62(8), pages 2341-2357, August.
    11. Glock, C. H. & Jaber, M. Y. & El Saadany, A., 2013. "Supply Chain Coordination with Emission Reduction Incentives," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 57672, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    12. Zhang, Bin & Xu, Liang, 2013. "Multi-item production planning with carbon cap and trade mechanism," International Journal of Production Economics, Elsevier, vol. 144(1), pages 118-127.
    13. Chen, Xiangfeng, 2015. "A model of trade credit in a capital-constrained distribution channel," International Journal of Production Economics, Elsevier, vol. 159(C), pages 347-357.
    14. Xu, Xinsheng & Wang, Hongwei & Dang, Chuangyin & Ji, Ping, 2017. "The loss-averse newsvendor model with backordering," International Journal of Production Economics, Elsevier, vol. 188(C), pages 1-10.
    15. Jerome Vanclay & John Shortiss & Scott Aulsebrook & Angus Gillespie & Ben Howell & Rhoda Johanni & Michael Maher & Kelly Mitchell & Mark Stewart & Jim Yates, 2011. "Customer Response to Carbon Labelling of Groceries," Journal of Consumer Policy, Springer, vol. 34(1), pages 153-160, March.
    16. Yan, Nina & Sun, Baowen & Zhang, Hui & Liu, Chongqing, 2016. "A partial credit guarantee contract in a capital-constrained supply chain: Financing equilibrium and coordinating strategy," International Journal of Production Economics, Elsevier, vol. 173(C), pages 122-133.
    17. Lee, Chang Hwan & Rhee, Byong-Duk, 2011. "Trade credit for supply chain coordination," European Journal of Operational Research, Elsevier, vol. 214(1), pages 136-146, October.
    18. Panos Kouvelis & Wenhui Zhao, 2012. "Financing the Newsvendor: Supplier vs. Bank, and the Structure of Optimal Trade Credit Contracts," Operations Research, INFORMS, vol. 60(3), pages 566-580, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Xu, Xinhan & Chen, Xiangfeng & Jia, Fu & Brown, Steve & Gong, Yu & Xu, Yifan, 2018. "Supply chain finance: A systematic literature review and bibliometric analysis," International Journal of Production Economics, Elsevier, vol. 204(C), pages 160-173.
    2. Qin, Juanjuan & Fu, Huiping & Wang, Ziping & Xia, Liangjie, 2021. "Financing and carbon emission reduction strategies of capital-constrained manufacturers in E-commerce supply chains," International Journal of Production Economics, Elsevier, vol. 241(C).
    3. Wu, Song-Man & Chan, Felix T.S. & Chung, S.H., 2022. "The impact of buyback support on financing strategies for a capital-constrained supplier," International Journal of Production Economics, Elsevier, vol. 248(C).
    4. Xu, Song & Fang, Lei, 2020. "Partial credit guarantee and trade credit in an emission-dependent supply chain with capital constraint," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 135(C).
    5. Wang, Jing & Wang, Kai & Li, Xiang & Zhao, Ruiqing, 2022. "Suppliers’ trade credit strategies with transparent credit ratings: Null, exclusive, and nonchalant provision," European Journal of Operational Research, Elsevier, vol. 297(1), pages 153-163.
    6. Shi, Jinzhao & Guo, Ju'e & Du, Qiang & Lin, Feng & Lai, Kin Keung & Cheng, T.C.E., 2020. "Optimal financing mode selection for a capital-constrained retailer under an implicit bankruptcy cost," International Journal of Production Economics, Elsevier, vol. 228(C).
    7. Jin, Wei & Zhang, Qinhong & Luo, Jianwen, 2019. "Non-collaborative and collaborative financing in a bilateral supply chain with capital constraints," Omega, Elsevier, vol. 88(C), pages 210-222.
    8. Xiaoli Zhang & Guoyi Xiu & Fakhar Shahzad & Caiquan Duan, 2021. "The Impact of Equity Financing on the Performance of Capital-Constrained Supply Chain under Consumers’ Low-Carbon Preference," IJERPH, MDPI, vol. 18(5), pages 1-22, February.
    9. Huang, Jing & Yang, Wensheng & Tu, Yiliu, 2020. "Financing mode decision in a supply chain with financial constraint," International Journal of Production Economics, Elsevier, vol. 220(C).
    10. Zhu, Xiaoliang & Guo, Zixue & Yang, Guoqing, 2023. "Credit coguarantee loan buyback contracts: Equilibrium and coordination strategies," International Journal of Production Economics, Elsevier, vol. 262(C).
    11. Keyong Zhang & Chunxia Li & Jianming Yao, 2019. "Research on Operation and Financing Strategy of an Emission-Dependent Supply Chain under Variable Transportation Fee Strategy," Sustainability, MDPI, vol. 11(16), pages 1-30, August.
    12. Xiaoli Zhang & Guoyi Xiu & Fakhar Shahzad & Yupeng Duan, 2021. "Optimal Financing Strategy in a Capital-Constrained Supply Chain with Retailer Green Marketing Efforts," Sustainability, MDPI, vol. 13(3), pages 1-19, January.
    13. Xie, Xiaofeng & Shi, Xinyu & Gu, Jing & Xu, Xun, 2023. "Examining the Contagion Effect of Credit Risk in a Supply Chain under Trade Credit and Bank Loan Offering," Omega, Elsevier, vol. 115(C).
    14. Ata Allah Taleizadeh & Aria Zaker Safaei & Arijit Bhattacharya & Alireza Amjadian, 2022. "Online peer-to-peer lending platform and supply chain finance decisions and strategies," Annals of Operations Research, Springer, vol. 315(1), pages 397-427, August.
    15. Faranak Emtehani & Nasim Nahavandi & Farimah Mokhatab Rafiei, 2023. "Trade credit financing for supply chain coordination under financial challenges: a multi-leader–follower game approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-39, December.
    16. Cao, Erbao & Yu, Man, 2019. "The bright side of carbon emission permits on supply chain financing and performance," Omega, Elsevier, vol. 88(C), pages 24-39.
    17. Faranak Emtehani & Nasim Nahavandi & Farimah Mokhatab Rafiei, 2021. "A joint inventory–finance model for coordinating a capital-constrained supply chain with financing limitations," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-39, December.
    18. Huang, Shuai & Fan, Zhi-Ping & Wang, Ningning, 2020. "Green subsidy modes and pricing strategy in a capital-constrained supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 136(C).
    19. Jena, Sarat Kumar & Padhi, Sidhartha S & Cheng, T.C.E., 2023. "Optimal selection of supply chain financing programmes for a financially distressed manufacturer," European Journal of Operational Research, Elsevier, vol. 306(1), pages 457-477.
    20. Yoo, Seung Ho & Choi, Thomas Y. & Kim, DaeSoo, 2021. "Integrating sourcing and financing strategies in multi-tier supply chain management," International Journal of Production Economics, Elsevier, vol. 234(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:208:y:2019:i:c:p:383-399. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.