Supply chain finance and firm employment: Evidence from China

We examine whether supply chain finance (SCF) stabilizes firm employment in the context of China's policy agenda emphasizing financial stability and stable employment. Using an annual panel of China's A-share listed firms from 2008 to 2024, we estimate the effect of SCF on employment and evaluate the underlying mechanisms. We find that SCF increases firm employment. Mechanism tests indicate that SCF operates through three mechanisms—enhancing technological innovation, relaxing financing constraints, and improving supply chain management efficiency. The effect is stronger among faster-growing firms, firms with greater financialization, and those with weaker core operating performance. Further analyses show that the impact of SCF on employment is characterized by a size threshold effect. SCF shifts hiring toward high-skill and highly educated workers, significantly increases average employee compensation, and exerts heterogeneous employment effects depending on firms' motivations to participate in SCF, such as working capital optimisation, liquidity management, buyer–supplier relationship maintenance, and supply chain stability.Overall, the study clarifies the mechanisms linking SCF to firm employment, adds to the evidence on SCF's economic consequences, and offers empirical support for policies that leverage SCF to stabilize employment.