The effect of supply chain finance initiatives on the market value of service providers

Abstract

Supply chain finance (SCF) aims to optimally align financial resource flows with material and information flows within supply chains. Although an increasing number of studies have demonstrated the potential of SCF resulting in improving cash-flow management and obtaining loan opportunities for suppliers and buyers, little is known about whether SCF initiatives can result in positive market value for service providers. Accordingly, the purpose of this study is to examine the effect of SCF initiatives with the distinctive characteristics (that is, firm characteristic, collaborative mechanism, and service type) on service providers’ market value. We adopted the event study methodology to analyse 177 SCF initiatives announced between 2008 and 2018 (Quarter 1) in the Chinese market. The event study results showed that the average abnormal returns over a three-day event window around the SCF announcements are 0.793%, representing an average increase of CNY 1.66 billion in market value for the service providers. Moreover, we found that such increase in market value is significantly higher when the SCF initiatives are announced by non-bank investors (e.g., fintechs), when the service providers collaborate to provide SCF services, and when the service providers upgrade existing SCF services rather than introduce new SCF services. As the market value of an SCF announcement is evaluated with several essential characteristics examined to understand which types of service providers and initiatives are considered to be the most valuable service offerings, this study offers important insights to SCF practitioners and supply chain stakeholders.