Incentive regulation of banks on third party logistics enterprises in principal-agent-based inventory financing

Abstract

In inventory financing, asymmetric information between banks and the third party logistics enterprises may incur moral risks, often causing economic losses of banks. To effectively solve this problem, a pure incentive scheme and a regulatory incentive scheme are designed with the principal-agent theory. By comparison, it is found that the pure incentive model is not applicable to practical conditions, and regulatory incentive model can not only solve practical problems substantially but also outbalance pure incentive model under certain conditions. The research results from example analysis given in this paper offer theoretical instruction and a practical method for effective regulation of banks.

Keywords

Inventory financing / Asymmetric information / Principal-agent / Regulatory incentive

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