Credit Supply Research Articles

Additional contract selection and parameter design under supplier credit guarantee financing

Additional contract selection and parameter design under supplier credit guarantee financing

PREDICTION OF FINANCIAL DISTRESS IN SELECTED FMCG COMPANIES USING THE ALTMAN Z-SCORE MODEL

Financial statement analysis has played a crucial role in evaluating a company's potential for financial difficulties, such as its ability to repay debts. Initially, credit suppliers utilized financial statement analysis to assess the creditworthiness of borrowers. However, in today's landscape, financial statement analysis has become widespread, involving a diverse range of ratios and catering to various users which include the suppliers, commercial banks, agencies involved in credit rating, existing and potential investors, higher management and others. Financial distress denotes to a company's incapacity to meet its financial commitments as they come due. Academic research in accounting and finance has predominantly emphasized defaulters of bond holders or bankruptcy as indicators of distress. The primary question revolves around whether the likelihood of distress significantly fluctuates based on the magnitude of financial statement ratios. This research study analyses the how sound the financial health of the company is and what are the probabilities of bankruptcy of selected companies belonging to the FMCG sector in India with the help of revised Altman Z-score model. This study focuses on the analysis of twenty (20) selected Fast Moving Consumer Goods (FMCG) companies listed on the Stock Index i.e Bombay Stock Exchange (BSE). These companies represent various segments such as Personal care, Food and Beverages, Alcohol and Cigarettes, Dairy, Food, Soaps and Detergents, Tobacco products, home care and other consumer durables. Based on the study's findings, it can be inferred that a majority of the companies in the FMCG sector in India exhibit good financial health and fall within the Safe Zone according to the Altman Z score model. The companies initially classified in the grey zone have shown improvements in their financial well-being in subsequent years. The Pearson correlation analysis reveals a noteworthy positive relationship between the variables and the Altman Z scores. Consequently, the study validates the effectiveness of the Altman Z score model as a reliable tool for predicting and forecasting the level of and impact of financial distress in companies. Emphasizing both the analytical and practical significance, this study aims to showcase the inherent value of using financial ratios. By employing financial ratios, this research underscores their potential to provide meaningful insights and practical applications in assessing corporate performance. As a result, investors can utilize this study to identify financially stable companies and make informed investment decisions based on the findings.

Sistem Pendukung Keputusan dalam Penentuan Pemberian Pinjaman Uang Pada Anggota Swasti Sari dengan Metode Promethee

Credit Cooperative (KOPDIT) Swasti Sari is a financial institution founded in 1988 in East Nusa Tenggara. Every year, these cooperative experiences a significant development, seen from the increase in assets and the number of members who continue to grow. Determination of credit policies by cooperatives requires the formulation of standard and credit requirements that include customer character, credit payment capacity, capital capability, and guaranteed customers. Provision of appropriate credit is very important and requires effective and efficient service. However, credit administration procedures in this cooperative are still not effective and often the granting of credit is not on target. This study aims to assist cooperative managers in making decisions on loan or credit to members using the Promethee method. This method is an auto ranking method that helps decision makers analyze multicriteria problems and determine the priority of receiving loan application. The results of the study are expected to be a reference in the development of a decision support system for the determination of loans in the Swasti Sari Cooperative.

Does the development of financial system influence the level of inflation?

Purpose: The objective of this paper is to examine the impact of financial development on inflation in the Economic and Monetary Community of Central Africa. Method: We use a system GMM as an empirical strategy, using data from the BEAC and WDI databases over the period 1996–2022. Results: The main results of this study show that despite the low level of inflation observed in the Economic and Monetary Community of Central Africa, the credit risk associated with the provision of credit increases inflation. This increase in inflation reduces the performance of the financial sector. Originality of the article: The originality of this article lies in the fact that the central bank must consider financial development as a tool of prudential analysis, which makes it possible to increase the effectiveness of the fight against inflation while improving the performance of the financial sector. This study also shows that financial development is a determinant of inflation.

Communication and hidden action: A credit market experiment

We study the impact of pre-contractual communication on market outcomes when economic relationships are subject to hidden action. Our experiment is framed in a credit market context and borrowers (second movers) can communicate with lenders (first movers) prior to entering the credit relationship. Communication reduces moral hazard (strategic default) and increases trust (credit provision) in an environment where opportunistic behavior by borrowers is revealed ex-post to lenders. By contrast, in an environment where strategic defaults are hidden behind a veil of uncertainty, we find a substantially weaker impact of communication. Borrowers are more likely to renege on repayment promises when they can hide opportunistic behavior from lenders. As a consequence, lenders extend less credit to borrowers who promise to repay. Hidden action undermines the positive effect of communication on market outcomes. Our findings have implications for the design of contracts and how to structure relationships with a risk of hidden action: for pre-contractual communication to unfold its full potential it needs to go hand-in-hand with post-contractual monitoring.

Building the city under financial frictions

Weak financial institutions may affect developing countries due to slowing the much-needed construction process of residential housing. Using novel data collected from Nairobi, I document considerable heterogeneity in the construction duration of new residential buildings, with about 40% of buildings started in 2009 still unfinished in 2018. To understand the role of financial development in constructing residential housing, I develop a heterogeneous agent model with financial frictions in which households construct individual housing units. Counterfactual simulations show that improvements in credit provision can substantially speed up the expansion of the aggregate housing stock and increase the city's density by enabling the construction of taller buildings. The model also predicts that investments in incomplete structures emerge as an alternative savings vehicle in the absence of reliable savings accounts.

Trade credit provision under uniform price regulation

To encourage product market competition, uniform price regulation is imposed to forbid suppliers from price discrimination. This paper investigates the impact of price regulation on a supplier’s trade credit decision in a supply chain with two heterogeneous retailers. In the baseline model without price regulation, we show that it is optimal for the supplier to provide net term trade credit to both retailers if their working capital is at a low level. Under price regulation, the net term remains optimal in trade credit provision to the rich retailer. However, a two-part term emerges to be optimal in the supplier’s trade credit provision to the poor retailer when it is highly capital-constrained. Interestingly, in the presence of a capital disparity, we find that the price discount in two-part term trade credit is independent of the rich retailer’s capital level, justifying the stability and uniformity of two-part terms in practice. We also incorporate retailer competition into our analysis and further validate the optimality of two-part terms under price regulation. In numerical experiments, we analyze the policy implications of price regulation and observe that uniform price regulation can result in a higher wholesale price and impede trade credit provision, hurting both small businesses and consumers.

Exploring the Nexus Between E-Banking, Credit Provision, and Shareholder Dividends in Regional Development Banks

This exploration aims to test and dissect factors that impact bank fiscal performance and their impact on shareholder tips. The variables used are E-Banking, credit handed as an independent variable, and ROE as a dependent variable. This exploration also looks at the influence of ROE on shareholder tips proxied by the DPR. This exploration was conducted in all BPDs in Sumatra, there are 8 BPDs registered with the OJK during the 2019 – 2022 period. The exploration system used was descriptive exploration with a quantitative exploration approach. Data recycling analysis uses multiple and simple retrogression analyses. The exploration results show that E-Banking and the credit handed have a significant influence on ROE, both concertedly and collectively. Meanwhile, fiscal performance (ROE) also influences shareholder tips (DPR).

Retracted: A Machine Learning Algorithm for Supplier Credit Risk Assessment Based on Supply Chain Management

Retracted: A Machine Learning Algorithm for Supplier Credit Risk Assessment Based on Supply Chain Management

Study of the Responsibility of Independent Appraisal Services of Bank Collateral Related to the Auction Value of Execution of Collateral Objects

In providing bank credit, collateral must be submitted for credit return. Collateral certificates/fixed assets are most favored by creditors/banks. The provision of credit by banks cannot be separated from the assessment of collateral first. The Internal Bank carries out the assessment, which can be done by the Public Appraiser or KJPP (Public Appraisal Service Office). The Public Appraiser will provide a report on the value of collateral submitted by the debtor to be used as a basis by the bank to determine the Ceiling (maximum amount of credit). The position of creditors who are more dominant in the process of granting credit will more or less affect the market value and liquidation of collateral. In this case, the debtor has a risk to the value of the collateral that the Public Appraiser has determined if the collateral goes bankrupt. This research uses a legislative and conceptual approach.

Financial technology, inclusive finance and bank performance

In recent years, the Chinese banking industry has increasingly used financial technology (FinTech) to increase the credit supply to key areas of inclusive finance, as “impulse” and “fee reduction and profit-sharing” behaviours have exerted pressure on bank performance. This paper analyses the impacts of FinTech on bank performance and the risk adjustment mechanism of FinTech.The results show that, first, when banks issue inclusive loans, the phenomenon of increasing the balance without a corresponding increase in profits, or even resulting in no profits develops because of cost-benefit asymmetry. “Doing business at a loss” negatively impacts bank performance; these losses are primarily associated with small and micro enterprises (SMEs). Second, digital inclusive finance effectively mitigates the negative impacts of traditional inclusive loans, and FinTech boosts bank performance. Third, the positive effects of FinTech are attributable to risk adjustment effects that reduce information asymmetry and transaction costs.This paper demonstrates that digitalisation empowered by FinTech has improved the service efficiency and customer experience of inclusive finance, as well as other business income and bank performance. Banks must be cautious when analysing the risks and benefits afforded by internet platform flow-data. Each head office should formulate a digital financial strategy and unify the deployment of innovative FinTech applications. Bank branches should promote such transformation but must engage in digital inclusive finance differently, based on the level of local FinTech development. This optimises the allocation of credit resources.

The real effect of shadow banking regulation: Evidence from China

I find a crackdown on shadow banking has real effects. For identification, I exploit a policy — the “New Regulations on Asset Management” (NRAM) — that restricts the issuance of wealth management products (WMP) in China. I show firms with high WMP exposure experience a decline in investments. The effects are pronounced for firms that are more profitable, have higher revenue growth, and are more financially constrained. Exploration of the possible channels of these effects shows a decline in the credit supply of banks that relied more on WMPs, driven by the fall in their shadow banking activities.

Economic Policy Uncertainty, Accounting Robustness and Commercial Credit Supply - A Big Data Analysis Based on Accounts Receivable

Abstract In this paper, a two-dimensional panel data model of economic policy uncertainty is investigated based on the individual fixed effects of panel quantile regression, and a nonparametric panel model with individual fixed effects is established. The unfolding of nonparametric penalized spline and the introduction of Bayesian in stratified quantile are utilized to construct regression models applicable to accounting robustness, respectively. In the empirical study, the economic policy uncertainty index, accounting robustness and commercial credit supply are measured respectively. The annual data of China’s Shenzhen and Shanghai A-share listed companies during the period from 2012 to 2021 were selected as the research basis, and Bayesian quantile regression was made on the basis of correlation analysis. The coefficient of commercial credit supply is found to be -0.0821, and the variable RD1 is negatively correlated with economic policy uncertainty. This regression result confirms hypothesis H1 of this paper, suggesting that private firms invest less in innovation when economic policy uncertainty is higher. In the test of economic policy uncertainty by type, the regression coefficients of RD2, EPU, and SIZE are negative, respectively -0.0368, −0.2124, and -0.1458, which indicates that fiscal policy, monetary policy, and exchange rate and capital account policy uncertainty are negatively correlated with the supply of business credit to enterprises. Based on this correlation, this study provides guidance for the development of business credit for enterprises.

Profitability of insect production for T. molitor farms in The Netherlands

Abstract Insects are increasingly considered as a relevant alternative protein source in the transition to a more circular economy and more sustainable food production. Understanding the profitability of insect farms is crucial for starting entrepreneurs, established rearers, and third parties. In this study we analysed the revenues and expenses of seven T. molitor farms in the Netherlands, representing approximately a quarter of the total sector. We calculated their gross margin and net present value. Revenues came from the sales of fresh larvae and insect frass, and from extension services. Expenses included investments, and non-allocated and variable expenses. Results cover technical and economic results, and a qualitative description of farm operations. The gross margins and net present values ranged from −180 to 2,030 and from −12,359 to 15,535 EUR/tonne fresh larvae production, respectively. The main determinants of T. molitor farms’ profitability included the sales price of larvae, and its labour and substrate expenses. Our estimates can be used by decision making of farmers, credit providers, and policy makers to support the growth of this still very small, but emerging sector.

The spillover effect of customers’ management tone on supply chain: Based on suppliers’ provision of trade credit

ABSTRACTBased on the data of China’s A-share listed companies from 2007 to 2022, this paper confirms that customers’ management tone has a spillover effect in the supply chain, which in turn affects suppliers’ provision of trade credit. The results show that the more positive customers’ management tone is, the more trade credit suppliers provide. A further analysis finds that the disclosure of customers’ management tone increases analyst attention, which in turn promotes suppliers’ provision of trade credit.In addition, when the supplier’s bargaining power is lower, the regional product market is more developed, and the customers’ annual report information quality is higher, the relationship between customers’ management tone and suppliers’ provision of trade credit is more significant. This study enriches the relevant literature on supply chain management and has important practical significance for promoting the stable development of supply chains.

The dynamic nexus of oil price fluctuations and banking sector in China: A continuous wavelet analysis

The fluctuations in World and national energy prices and energy policies might affect the financial and real sectors. This paper focuses on the nexus between oil prices and bank credits in China through continuous wavelet analyses in the following distinct ways. First, we observe the potential effects of oil prices on Chinese claims on the private sector by following the whole sample data, and, sub-samples of the data. Secondly, we account for higher and lower frequencies for sub-samples and the whole sample in the dynamic interaction between oil prices and Chinese claims on the private sector. Thirdly, this study provides more insight into understanding the influence of oil prices on the supply of credits through time-varying estimations at different scales (frequencies). The continuous wavelet analyses demonstrate a positive impact of Chinese oil prices on the Chinese claims on the private sector from 1999:06 to 2019:02 at a 3-8-year cycle which corresponds to the full liberalization of the Chinese domestic oil market. The positive effect of the world oil price on claims on the private sector is, however, restricted only for the sub-period 2005–2012 due to a relatively lower degree of regulation of the Chinese domestic market during this sub-period.

Consumer demand and credit supply as barriers to growth for Black-owned startups

We formulate a framework showing that differences in capital returns and capital intensity between groups of firms can identify relative differences in consumer demand and credit constraints. Using micro-data on Black- and White-owned startups, we find robust evidence that Black-owned startups have lower capital returns, implying that Black-owned startups face lower consumer demand due to race. In contrast, we find mixed evidence of tighter credit constraints due to race. We further show that differences in capital returns are persistent over time, whereas capital intensity differences are transitory. This suggests that lower demand, rather than credit constraints, might be the main barrier to growth for Black-owned startups.

Barriers to An Efficient Logistics in Africa: A Direction for Further Studies

In the situation where the main credit supply of the country’s enterprises is done through the banking system, it is necessary to analyze and explore the defects of the financing and credit supply relationship between banks and enterprises. This study is considered a descriptive-applied research and the required data were collected through library studies, workplace observation, and interviews with process experts. In this research, 37 credit experts from 17 different bank branches were interviewed about the process of granting facilities. Work-Centered Analysis (WCA) framework and conducting audits through questionnaires and related checklists revealed that the structure of Iran’s credit supply chain network suffers from such problems as deviation in the appropriate use of allocated credit resources, structural faults of the banking system and lack of administrative health, high bureaucracy, directed facilities, etc. In the end, some suggestions are provided for redesign and optimization of the credit supply network.

Examining the credit supply chain network problems of Iran’s banking industry Using Work-Centered Analysis (WCA) framework

In the situation where the main credit supply of the country’s enterprises is done through the banking system, it is necessary to analyze and explore the defects of the financing and credit supply relationship between banks and enterprises. This study is considered a descriptive-applied research and the required data were collected through library studies, workplace observation, and interviews with process experts. In this research, 37 credit experts from 17 different bank branches were interviewed about the process of granting facilities. Work-Centered Analysis (WCA) framework and conducting audits through questionnaires and related checklists revealed that the structure of Iran’s credit supply chain network suffers from such problems as deviation in the appropriate use of allocated credit resources, structural faults of the banking system and lack of administrative health, high bureaucracy, directed facilities, etc. In the end, some suggestions are provided for redesign and optimization of the credit supply network.

Comparative Analysis of Fruit Tree–Based Agroforestry and Monoculture in Tackling Climate Change Challenges: Evidence from Sofi District, Ethiopia

Abstract The effects of climate change have hit the agriculture sector in Africa hard. Making adjustments to adapt to the changing environment is critical for countries like Ethiopia, whose primary source of income is subsistence agriculture, which is heavily reliant on rainfall. As a result, establishing context-specific adaptation approaches is crucial for reducing the adverse effects of climate change. This study was conducted at Sofi district, Harari Regional State, Ethiopia, to compare the contribution of fruit tree–based agroforestry and monoculture in tackling climate change challenges. To choose two kebeles and 102 household heads, multistage random sampling was used. Soil and biomass measurements were used to collect soil samples and biomass samples. According to the findings of the study, there are significant differences in how agroforestry and monoculture smallholder farmers deal with climate change challenges in terms of livelihood strategies, with agroforestry smallholders being more resilient. Carbon stock accumulation was estimated to be 453.32 mg ha−1 in agroforestry and 124.7 mg ha−1 in monoculture, where no trees were found on monoculture land. The findings of the study demonstrated that carbon stock accumulation was statistically significant between the mean of soil organic carbon agroforestry land use. Agroforestry systems, in general, contribute significantly more to smallholder livelihoods, as well as the socioeconomic system, in the face of climate change concerns. Incorporating smallholders into an agroforestry system for long-term livelihood sustainability requires support in the form of resources, training, and research. In the face of climate change threats, local, regional, and national governments, as well as financial institutions and other agricultural credit providers, must support smallholders.