Retracted: An Analysis of Supply Chain Financing Decision-Making in View of the Loan Limit

Abstract

In the supply chain financing business, the bank's loan interest rate and loan amount exert an important effect on the retailer's order quantity. In this paper, we study the effect of bank interest rate changes on the retailer's performance with and without a loan limit in the financing business. The study shows that when the bank imposes no loan limit, the retailer's optimal order quantity and profits will decrease with the increase of bank's loan interest rate, and the retailer's order quantity with which the bank gains the maximum profits and the bank's profits will increase. When the bank sets a loan limit, the retailer's order quantity can only be limited to a quantity range with which the bank gains the maximum profits, the retailer's profits decrease and the bank's profits increase. On the other hand, the study shows that without default risk, the retailer's optimal order quantity has nothing to do with the equity funds; while with default risk, the retailer' optimal order quantity will decrease with the increase of equity funds.