FINTECH THRUST SEMINAR | Financing the Newsvendor through A Captive Finance Company
Financing the Newsvendor through A Captive Finance Company
Abstract:
We study the benefit for a manufacturer (she) to found a captive company, a wholly- or partially-owned subsidiary, to finance the inventory of a capital constrained retailer (he), who procures a product from the manufacturer to satisfy the upcoming uncertain demand. The retailer can borrow from banks, take trade credits of the manufacturer, or borrow from the captive. Comparing with leaving the retailer borrowing from an independent bank, the manufacturer can increase her profit by controlling the captive to provide more attractive finance to the retailer. Under trade credits, the manufacturer may have to borrow from external investors, to overcome the limit of her own working capital. However, it may also expose the manufacturer to higher default risk rooted from financing the retailer. On the other hand, while the captive can serve as a risk shield of the manufacturer, it might reduce the profitability of the manufacturer, who can only claim part of the benefits from financing the retailer as the dividend, according to her share of the captive company. We show that when the retailer’s credit rating is not too low and manufacturer’s credit rating is not too high, captive financing can simultaneously benefit the three parties: the manufacturer, the retailer, and the external investors. The result may serve as an explanation of the prevalence of captive finance practice.
赵文辉，美国俄亥俄州立大学运筹学博士；清华大学土木工程硕士、土木/计算机双学士。2010年8月加入上海交通大学安泰经济与管理学院、2018年8月晋升终身职副教授、同年12月破格晋升终身职教授。上海高校特聘教授（东方学者）。中国管理科学与工程学会供应链与运营管理分会副主任、学术委员会主席，负责了学会成立以来最优论文评审工作。论文发表在Management Science, Operations Research, Manufacturing & Service Operations Management, Math Programming等国际运营/数学期刊，Web of Science核心合集单篇引用470余次。成果被Manufacturing & Service Operations Management期刊论文进行了实证检验。指导了世界500强企业供应链金融项目，试运行9个月直接经济效益1千万元；实施前三年和后三年净利润、营运资金周转率等指标变化显著。主持国家自科重点项目《关键核心产品供应链风险防控与智能管理》。
Professor Zhao Wenhui, Ph.D. in Operations Research from Ohio State University, holds a Master's degree in Civil Engineering from Tsinghua University, and dual Bachelor's degrees in Civil Engineering and Computer Science. He joined the Antai College of Economics and Management at Shanghai Jiao Tong University in August 2010 and was promoted to Associate Professor with tenure in August 2018, and then to Full Professor with tenure in December of the same year. He is a specially appointed professor (Eastern Scholar) at Shanghai universities. He serves as the Deputy Director of the Supply Chain and Operations Management Branch and Chair of the Academic Committee of the China Association for Management Science and Engineering, overseeing the best paper review work since the establishment of the association. His papers have been published in international operations/mathematics journals such as Management Science, Operations Research, Manufacturing & Service Operations Management, and Math Programming, with over 470 citations in the Web of Science core collection. His work has been empirically validated by the journal Manufacturing & Service Operations Management. He has supervised supply chain finance projects for Fortune Global 500 companies, resulting in direct economic benefits of 10 million RMB during a nine-month trial run, with significant changes in key indicators such as net profit and turnover rate of operating funds in the three years before and after implementation. He is leading the National Natural Science Foundation of China Key Project "Risk Prevention and Intelligent Management of Key Core Product Supply Chain."