Credit Contract between Bank and Third-party Logistics Firm in Inventory Financing in China

In our study we apply the principal-agent model to study credit contract proposed by banks to motivate third-party logistics firms (TPL) and consider supervision as an important variable. Our results indicate that when supervision is introduced into contract, TPL can be motivated to work more efficiently. In particular, we give bank´ efficient supervision set and bank can be better off by keeping the supervision level within this set. Further, we give the optimal level of supervision.