Volume 3 · Issue 10 (2026)
DOI number:
10.66521/2938-9933-2026103101
The Value of Equity Financing in Capital-Constrained Supply Chains under Different Carbon Regulations
Xiaohui Huang*, Yu Feng, Jie Ma
School of Economics and Management, Beijing Polytechnic University, Beijing, 100176, China
Corresponding Author: Xiaohui Huang (103254@bpi.edu.cn)
Abstract: With tightening environmental requirements, small and medium-sized enterprises (SMEs) may face the dual pressure of emission reduction and capital shortage. Focusing on a retailer-led supply chain in which the supplier is capital-constrained, we construct a Stackelberg game model to examine the equilibrium decision-making and value of equity financing. Our results show that capital constraints inhibit the supplier's emission-reduction effort, and the scarcer its own funds, the stronger this inhibition. Equity financing can relieve the capital shortage and incentivize higher emission reduction efforts. Under both cap-and-trade and carbon tax policies, equity financing admits a Pareto-improving region, yet its value is realized only when the dividend-sharing ratio is set appropriately. And, carbon parameters (the carbon price, tax rate) and the supplier's own funds jointly determine the boundary of this region. These findings offer theoretical implications for the operations and financing decisions of low-carbon supply chains.
Keywords: Cap-and-trade policy; Carbon tax policy; Equity financing; Stackelberg game
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