Do network capabilities improve corporate financial performance? Evidence from financial supply chains

Abstract

PurposeThe purpose of this study is to bridge the gap in the literature on supply chain finance (SCF) by exploring the relationship between network capabilities and corporate financial performance (CFP) in financial supply chains (FSCs).Design/methodology/approachThe authors collect panel data and adopt regression analysis to analyse the joint investment activities among 1359 manufacturing firms and 289 financial service providers in China to explore how network capabilities, both network power and network centrality, improve CFP in the FSCs.FindingsUnder the FSCs environments, network centrality (i.e. eigenvector centrality, closeness centrality and betweenness centrality) raises CFP (ROA, ROE and Tobin's Q) and network power (node degree, clustering coefficient) also improves CFP. However, node strength from the network power stream has a negative effect on Tobin's Q, indicating that when the partner of a firm has an extremely strong influence in FSCs; this weakens the bargaining ability and flexibility of the focal firm, thus reducing its long-term financial performance.Practical implicationsThe joint investment activities among supply chain partners and financial service providers help managers understand the advanced financing solutions generated by internal and external network organisations as well as be aware of network capabilities' impact on CFP in FSCs.Originality/valueThis study answers the call for more empirical research on SCF to provide a broader sample to examine financial supply chain management. This is one of the earliest studies to shed light on a new perspective – how network capabilities improve CFP in the FSCs.