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Digital ripples: The impact of customers' digital transformation on the financing constraints of suppliers

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  • Li, Qinyang
  • Li, Mingrui
  • Li, Mengru
  • Li, Tao

Abstract

The wave of digitization is sweeping across the world, boosting the transformation of various industries and bringing unprecedented new opportunities for firms. This paper examines the impact of digital transformation of customer firms on the financing constraints of suppliers. We find a significant spillover effect in the supply chain that the digital transformation degree of customer firms is negatively correlated with the financing constraints of suppliers when the comprehensive performance of customers is better. Furthermore, this effect is more evident for suppliers that are smaller, with shorter years of listing, and located in regions with fewer banks and greater distances from their customers. Additionally, the impact is more pronounced for customers that are state-owned and belong to high-tech industries. The mechanism test shows that the digital transformation of customers mainly alleviates the financing constraints of suppliers by reducing the information asymmetry of customer firms, increasing the credit availability and lowering the private equity placements discounts of suppliers. Additionally, the digital transformation of customers significantly reduces the cost of debt financing for suppliers. These findings enrich research on financing constraints and digital transformation, as well as provide important implications for companies within the supply chain on how to mitigate financing constraints through digital transformation.

Suggested Citation

  • Li, Qinyang & Li, Mingrui & Li, Mengru & Li, Tao, 2025. "Digital ripples: The impact of customers' digital transformation on the financing constraints of suppliers," International Review of Financial Analysis, Elsevier, vol. 105(C).
    • Handle: RePEc:eee:finana:v:105:y:2025:i:c:s1057521925004740
    DOI: 10.1016/j.irfa.2025.104387
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