Supply chain finance and firm diversification: Evidence from China

Lei Xu, Bin Li, Chen Ma and Jingyu Liu
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Lei Xu: UniSA Business, University of South Australia, Adelaide, SA, Australia

Australian Journal of Management, 2023, vol. 48, issue 2, 408-435

Abstract: We establish a link between supply chain finance (SCF) and the diversification of core firms through a proprietary dataset of listed firms on the Shanghai and Shenzhen Stock Exchanges. Our findings suggest that SCF may significantly reduce diversification with a stronger impact on firms of lower supply chain concentration. Our exploration, from the perspectives of resource occupation, innovation incentive and market power improvement, suggests that SCF may allow the core firms to better focus on their major businesses. Further tests suggest that SCF may significantly reduce the diversification by private and non-manufacturing firms, and those of high executive shareholding. It may also lead to reduced agency costs and enhanced production efficiency with positive economic consequences. Our findings may have such policy implications that SCF may significantly serve the real economy and help sustain high-quality economic growth in the Asian Era. JEL Classification: G11, G32, O12

Keywords: Core firm; diversification; real economy; supply chain concentration; supply chain finance (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:48:y:2023:i:2:p:408-435

DOI: 10.1177/03128962221075366

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