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Supply chain finance and soft budget constraints: A nonlinear threshold effect perspective from China's listed companies

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  • Chen, Rui
  • Huang, Qiqing

Abstract

This research examines how supply chain finance (SCF) affects financial distress through textual analysis, focusing on budgetary soft constraints. The study finds that listed companies engaging in SCF significantly reduce their financial distress risk. The mechanism test shows that SCF primarily eases financial distress by reducing strategic burdens and improving budgetary soft constraints rather than by addressing social burdens. Heterogeneity analysis indicates that SCF’s positive impact on budgetary soft constraints is pronounced in companies with formal contracts (state-owned enterprises), but it does not mitigate the negative effects of political connections (informal contracts). Additionally, SCF has a positive effect on firms with less efficient investment and financing activities. Findings offer empirical insights into improving corporate budgetary soft constraints, optimizing the investment and financing environment, and achieving sustainable development goals, helping enterprises make informed decisions on SCF to address financial difficulties.

Suggested Citation

  • Chen, Rui & Huang, Qiqing, 2025. "Supply chain finance and soft budget constraints: A nonlinear threshold effect perspective from China's listed companies," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008190
    DOI: 10.1016/j.frl.2025.107560
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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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