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Supply chain finance and firm diversification: Evidence from China

Author

Listed:
  • Lei Xu

    (UniSA Business, University of South Australia, Adelaide, SA, Australia)

  • Bin Li
  • Chen Ma
  • Jingyu Liu

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

Suggested Citation

  • Lei Xu & Bin Li & Chen Ma & Jingyu Liu, 2023. "Supply chain finance and firm diversification: Evidence from China," Australian Journal of Management, Australian School of Business, vol. 48(2), pages 408-435, May.
    • Handle: RePEc:sae:ausman:v:48:y:2023:i:2:p:408-435
    DOI: 10.1177/03128962221075366
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    More about this item

    Keywords

    Core firm; diversification; real economy; supply chain concentration; supply chain finance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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