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

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.