Trade Credit and Lending Strategy of Supply Chain with Information Asymmetry

DOI

10.2991/rac-16.2016.95How to use a DOI?

Keywords

formation asymmetry;Supply chain;Trade credit;Lending strategy

Abstract

In the symmetric case the lender and borrower has same information about buyer. While in the asymmetric case whether the buyer default is the private information of borrower. The theoretical framework we constructed in this study has focused on lending strategy of lender to the case when the buyer of borrower may default in the circumstance of supply chain. The information asymmetry is considered this framework and hence incentive compatibility constraint of borrower is necessary for lender to ensure desired effort made by borrower. We define the incentive compatibility constraint, which is technically the fundamental of our model in two case. The static comparison and numerical analysis of the model illustrate that the loan interest in symmetric case is significantly lower than it in asymmetric case. Default risk of buyer increases the cost of borrower compared to the case when buyer pays for sure and massive trade credit associated with higher loan interest. However the impact on loan amount of credit risk and default risk is more complex. It turns out that information asymmetry can be seen as a moderating factor in the impact on loan amount of default risk and credit risk.

Copyright

© 2016, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Xiaofeng Xie
AU  - Ynag Yang
AU  - Zongfang Zhou
PY  - 2016/11
DA  - 2016/11
TI  - Trade Credit and Lending Strategy of Supply Chain with Information Asymmetry
BT  - Proceedings of the 7th Annual Meeting of Risk Analysis Council of China Association for Disaster Prevention
PB  - Atlantis Press
SP  - 589
EP  - 593
SN  - 1951-6851
UR  - https://doi.org/10.2991/rac-16.2016.95
DO  - 10.2991/rac-16.2016.95
ID  - Xie2016/11
ER  -