Management Information Systems Commons^™

The Roles Of Bank And Trade Credits: Theoretical Analysis And Empirical Evidence, Gangshu (George) Cai, Xiangfeng Chen, Zhiguo Xiao

Information Systems and Analytics

This study investigates the roles of bank and trade credits in a supply chain with a capital-constrained retailer facing demand uncertainty. We evaluate the retailer's optimal order quantity and the creditors' optimal credit limits and interest rates in two scenarios. In the single-credit scenario, we find the retailer prefers trade credit, if the trade credit market is more competitive than the bank credit market; otherwise, the retailer's preference of a specific credit type depends on the risk levels that the retailer would divert trade credit and bank credit to other risky investments. In the dual-credit scenario, if the bank credit …