Abstract
The diffusion of credit risk in a supply chain finance network can cause serious consequences. Using the “1 + M + N” complex network model with BA scale-free characteristics, this paper studies the credit risk diffusion in a supply chain finance network, where the credit risk diffusion process is simulated by the SIS epidemic model. We examine the impacts of various key factors, including the general financing ratio, cure time, network structure, and network scale on the credit risk diffusion process. It is found that credit risk diffusion rarely occurs in a network with a low average degree. When the average degree of the network increases, the occurrence of the credit risk diffusion becomes more frequent. Besides, the degree of the initially infected nodes with credit risk does not affect the density of the infected nodes in the steady state, while a higher degree of the cure nodes helps restrain the diffusion of credit risk in the supply chain finance network. Finally, the simulation result based on the supply chain finance network with a core node indicates that the diffusion of the credit risk diffusion in sparse supply chain finance networks with low average degrees is unstable. The results provide better understandings on the credit risk diffusion in supply chain finance networks.
Highlights
Since supply chain finance is an important means to solve the financing problem of small and medium-sized enterprises (SMEs), it is crucial to managing the risks in supply chain finance
Through the above model analysis and simulation, we can find that the general financing ratio and the network structure influence the vulnerability of the network negatively, the density of the infected nodes, and the speed of credit risk diffusion in the steady state
The cure time has no significant effect on the vulnerability of the network and the speed of awareness credit risk diffusion, but positively affects the density of the infected nodes in the steady state, and the network size does not have a significant effect on the diffusion process of the credit risk in supply chain finance
Summary
Since supply chain finance is an important means to solve the financing problem of small and medium-sized enterprises (SMEs), it is crucial to managing the risks in supply chain finance. As one of the significant risks in supply chain finance, credit risk is contagious, leading to credit risk diffusion in the economy. In a supply chain finance network, large-scale credit risk diffusion can be triggered due to the complex relationship among individual interconnected entities. Compared with credit defaults and contagions in traditional financing practices dealing with individual firms, the diffusion of supply chain finance credit risks in the network can bring more serious consequences to the economy. The China steel trade crisis incident that occurred in 2012 is a typical example of the credit risk diffusion in a supply chain finance network. Large state-owned or listed steel trading companies which served as “shadow banks” raised credit financing for small and medium-sized steel trading companies. It is necessary to study the essential influencing factors of the credit risk diffusion phenomenon and provide the corresponding decision-making basis for the management of supply chain financial credit risk
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