Optimal-Decision Research on Ordering Financing Based on Supply Chain Finance

According to the non-completeness of financial contract, there will not exist the optimal contract ex ante between financial institution and SME(small and medium enterprise). However the optimal choice may reach through renegotiation. We design optimal decision-making model of staged loaning which concludes three aspects: giving up re-loaning, loaning with renegotiation, and loaning without renegotiation under perfect information only on the condition of individual rationality constraint and then get the first best solution. The optimal decision-making model of staged loaning in ordering financing with imperfect information and with renegotiation is founded on both the condition of individual rationality constraint and incentive compatibility constraint and the second best solution is reached. Comparing the first best solution and second best solution, we can conclude that staged loaning is superior to upfront loaning and that with the increasing of moral hazard, second best solution will go to first best solution when considering pledged orders, contract and staged loaning.