Credit coguarantee loan buyback contracts: Equilibrium and coordination strategies

Abstract

Buyback guarantee financing requires core enterprises to provide both a buyback policy and a credit guarantee. The recent economic downturn has severely weakened the credit guarantee capacities of enterprises. Guarantee companies (GCs) that provide financing credit guarantee services address this issue specifically and have attracted considerable attention. We consider incorporating a GC into the supply chain to fully coguarantee with core enterprises, introduce risk compensation into the model to hedge against default risk, and formulate a multilevel Stackelberg game with the GC as the leader. A credit coguarantee loan buyback (CCLB) contract, integrating a credit coguarantee loan and a buyback contract, is designed to analyze equilibrium strategies. Additionally, we explore the coordination conditions for the CCLB contract and perform numerical analysis to illustrate its effectiveness. The optimal decisions under different financing scenarios are comparatively analyzed to show coguarantee effectiveness. We also investigate the value of CCLB compared to trade credit finance. We find that a higher decentralized optimal order quantity depends on a lower service fee rate, or a higher buyback price and return rate in some cases, while the optimal service fee rate is conditional on the coguarantee share and risk compensation ratio. The results reveal that with appropriate parameters, the proposed contract can achieve coordination. For a supply chain with a higher buyback price and return rate or greater risk compensation, GCs prefer to join; otherwise, they either cover a lower risk or charge a higher service fee rate to achieve a sustainable credit guarantee business.