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Does supply chain finance development alleviate cash flow volatility in entrepreneurially oriented firms?

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  • Yang, Manze
  • Liao, Yun
  • Li, Mingyue

Abstract

Whether supply chain finance (SCF) helps firms manage cash flow volatility rather than merely improve liquidity has become a crucial issue in corporate finance and entrepreneurship research. Using panel data from Chinese A-share listed firms between 2016 and 2023, this study develops a theoretically grounded framework integrating the resource-based view, dynamic capabilities theory, and institutional perspectives to explain how SCF mechanisms, such as reverse factoring, inventory pledging, and receivables financing, stabilize financial performance. The results show that greater SCF engagement significantly reduces cash flow volatility after controlling for firm characteristics. This stabilizing effect is especially strong among entrepreneurially oriented firms and state-owned enterprises. Robustness tests using lagged and instrumental variables support a causal interpretation. Overall, the findings suggest that SCF serves not only as a liquidity-enhancing tool but also as a financial stabilizer that enables firms to absorb shocks and manage uncertainty.

Suggested Citation

  • Yang, Manze & Liao, Yun & Li, Mingyue, 2026. "Does supply chain finance development alleviate cash flow volatility in entrepreneurially oriented firms?," Finance Research Letters, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:finlet:v:88:y:2026:i:c:s1544612325024535
    DOI: 10.1016/j.frl.2025.109204
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