Nexus of Financing Constraints and Supply Chain Finance: Evidence from Listed SMEs in China

Sin-Huei Ng (), Yunze Yang, Chin-Chong Lee and Chui-Zi Ong
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Sin-Huei Ng: School of Economics and Management, Xiamen University Malaysia, Sepang 43900, Malaysia
Yunze Yang: Southampton Business School, University of Southampton, Southampton SO17 1BJ, UK
Chin-Chong Lee: Nottingham University Business School, Nottingham University Malaysia, Semenyih 43500, Malaysia
Chui-Zi Ong: School of Economics and Management, Xiamen University Malaysia, Sepang 43900, Malaysia

IJFS, 2023, vol. 11, issue 3, 1-16

Abstract: As opposed to developed markets, financing constraints are a more pressing issue among Small and Medium-Sized Enterprises (SMEs) in emerging markets. We explore the severity of financing constraints on SMEs, and examine the role of supply chain finance (SCF) in alleviating those constraints, with the focus on a large emerging market: China. Using the panel data of SMEs listed on Shenzhen Stock Exchange from 2014 to 2020, we employ robust estimations of panel-corrected standard errors (PCSEs) and robust fixed-effects methods to analyze the issue. Our cash–cash-flow sensitivity model points out that listed SMEs in China show significant cash–cash-flow sensitivity, and financing constraints are prevalent. We document that the development of SCF has a mitigation effect on the financing constraints on the SMEs. Our robustness test with Yohai’s MM-estimator is also supportive of the main finding. Our study indicates the importance of supply chain finance development in alleviating the financing constraints on SMEs and, subsequently, supporting their sustainability journey. Overall, our findings have important policy implications for the stakeholders involved in emerging markets, and there are lessons to be learned from the Chinese experience. There is still much to be explored in the nexus of SCF and the financing difficulties of SMEs in China at present, with much of the extant literature concentrating only on specific financing mechanisms. Thus, our study fills the gap by providing a broad and comprehensive analysis of the issue.

Keywords: financing constraints; supply chain finance; SMEs; cash–cash-flow sensitivity; panel-corrected standard errors (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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