Financing a push and pull supply chain under revenue sharing: value addition and default risk transmission mechanism

Supply chain finance (SCF) releases participants' capital constraints and facilitates their operations. SCF and transactional contracts can have synchronised effects on participants' performance. This research analyses how credit financing and bank loans with revenue-sharing contracts can help capital-constrained suppliers and retailers improve their financial and risk management performance in the push and pull supply chains. Results suggest that SCF generates greater profits than capital-constrained supply chains without SCF and well-capitalised supply chains, demonstrating a leverage effect. In a push scenario, SCF enhances the wholesale price effect and risk-sharing effect of the revenue-sharing contract, resulting in increased order quantity and profits for participants, albeit with an amplified default risk transmission effect. Conversely, in a pull scenario, SCF boosts participant profitability by strengthening the order quantity effect of the wholesale price contract, although its risk-sharing effect is weakened by the revenue-sharing contract, thereby mitigating the default risk transmission effect. When the revenue-sharing rate is low, the push model performs better in terms of profit enhancement but exhibits higher default risk transmission levels compared to the pull model, and vice versa. The findings guide participants in leveraging SCF and revenue-sharing contracts to enhance their benefits and control the default risk transmission level.