System dynamics modelling of retailers' credit risk
by Vahid Baradaran; Maryam Keshavarz
International Journal of Industrial and Systems Engineering (IJISE), Vol. 26, No. 3, 2017

Abstract: Distribution companies face some issues in their business transactions one important issue is called credit risk and this arises when some retailers, after receiving goods, are not able to repay their liabilities or maybe they do not want to repay their debts. In this respect, financial transactions may enable different behavioural mechanisms including ending business with retailer, claiming for compensations, returning delivered goods and these add to the complexity of the problem. Therefore the problem of retailers credit scoring is not a linear problem but a complex and dynamic problem. This study considers the mechanisms enabled by retailers credit risk and analyse them in a cyclic and dynamic manner. To this end, first the influencing factors on the retailers' credit risk should be determined. Then the relation between these variables should be specified in the system dynamics model. The integrated system of influencing factors and the credit risk mechanisms is modelled into a system dynamics model in which the accumulated amount of overdue payments is considered as the indicator for retailers' credit risk. This is the first study that proposes a system dynamics model to analyse credit risk of the retailers.

Online publication date: Wed, 07-Jun-2017

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