An agent-based model of supply chain financing: agents’ strategies, performance, and risk contagions

ABSTRACT

Supply chain finance (SCF), which has gained prominent attention from academicians, is a complex process involving various participants. However, previous studies have not provided a comprehensive framework integrating these participants or a consensus on how participants’ strategies influence SCF. Here, a comprehensive framework is proposed to investigate SCF through an agent-based approach. We chose the Chinese market to proxy key model parameters. We find that although banks prefer large businesses, trade credit, and partial credit guarantee still play a pair of main complementary financing channels for small and medium enterprises (SMEs). The cautious strategies of agents indeed significantly decrease the risk contagions in the supply chain. However, marketisation negatively moderates this effect for SMEs. From the banks’ perspective, although longer-term credit policies bring lower risk contagions, they increase the uncertainty of the banks’ risk. In addition, our extended framework also shows that the market-oriented financial system benefits either large business or SMEs as well as smooths the risk fluctuation for banks. This study not only verifies some economic phenomena but also provides a new systematic angle for understanding SCF. We also discuss in detail this study’ important practical insights and theoretical contribution.

KEYWORDS:

• Supply chain finance
• agent-based
• strategies
• trade credit
• simulations

Data availability statement

Our research is completed through simulation, and all relevant data are within the paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The work was supported by the National Natural Science Foundation of China [71701166,72101172]. Natural Science Foundation Project of Sichuan Province [23NSFSC4544]