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Effects of partial demand uncertainty reduction on private equity financing in small and medium-sized enterprises: A supply chain perspective

Author

Listed:
  • Jie Deng
  • Li Yao
  • Mengyi Chen
  • Qingsong He

Abstract

The effect of demand uncertainty reduction (DUR) on supply chain management has received tremendous attention. From a financial perspective, studying the impact of DUR is equally significant. This study explores the relationship between DUR and private equity (PE) financing in retail enterprises within a supply chain, which comprises a dominant supplier and a subordinate retailer. This article establishes decision models for a retailer backed by PE under three market demand conditions: range, mean, and range with mean. The study further investigates the impact of partial demand uncertainty reduction (PDUR) on the retailer and PE through comparative analysis of these scenarios. To address incomplete market demand information during the decision-making process, the study employs the minimax regret criterion to construct and solve the model. An intriguing finding of this study is that contrary to intuition, PDUR not only fails to promote PE but also reduces the retailer’s willingness to finance and decreases the asset size for both the retailer and PE. In addition, the better the growth potential for the retail enterprise, the more severe the negative impact brought about by PDUR. Moreover, the impact of PDUR on supplier and supply chain performance is two-fold. PDUR based on range information has a negative impact on the expected profit of the supplier and the supply chain, while PDUR based on mean information has a positive impact on their expected profit.

Suggested Citation

  • Jie Deng & Li Yao & Mengyi Chen & Qingsong He, 2024. "Effects of partial demand uncertainty reduction on private equity financing in small and medium-sized enterprises: A supply chain perspective," PLOS ONE, Public Library of Science, vol. 19(3), pages 1-20, March.
    • Handle: RePEc:plo:pone00:0295713
    DOI: 10.1371/journal.pone.0295713
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    References listed on IDEAS

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