It is a marathon, not a sprint: The impact of supply chain finance on firms’ short-term debt for long-term investments

Abstract

This paper investigates the role of supply chain finance as a promising alternative solution to balance the trade-off between the benefits and risks associated with using short-term debt for long-term investments. Using data on Chinese A-share listed companies from 2007 to 2022, we find that firms’ participation in supply chain finance effectively discourages their use of short-term debt to finance long-term investments. We explore three underlying channels through which supply chain finance influences this practice and demonstrate that supply chain finance alleviates information asymmetry, enhances credit allocation efficiency, and improves firms’ operational efficiency, thereby reducing their reliance on short-term debt for long-term investments. Our findings contribute to the literature by providing new insights into the impact of supply chain finance on corporate financing behavior and investment decisions.