Reduce Financing Costs Research Articles

FinTech and SME’ performance: Evidence from China

Although many papers have explored the factors influencing the performance of Small and medium-sized enterprises (SMEs), they have neglected the perspective of FinTech. On this basis, this study explores the impact of FinTech on SMEs’ performance using data from NEEQ-listed companies in China from 2011 to 2020. The empirical results show that FinTech can significantly improve SMEs’ performance. The mechanism test shows that FinTech can enhance SMEs’ performance by expanding the financing scale and reducing financing costs, that is, alleviating financing constraints. Heterogeneity analysis finds that the positive relationship between FinTech and SME’ performance is more significant among smaller firms, higher growth firms, and better regional marketization. Overall, this study provides theoretical and practical guidelines on how to effectively use FinTech to alleviate the financing problems of SMEs and thus improve their performance.

Supply Chain Finance in SMEs A Conceptual Analysis

This paper addresses the relatively new concept of supply chain finance (SCF) and its application in SMEs. The flow of financial resources in supply chains is most important and has become the focus of study. As a result, the integration of finance and supply chain management has opened new business areas for banks as well as financial and logistics service providers. Supply Chain Finance solution can create a 'win-win' situation for both buyer and supplier. So this research article focuses on the study of supply chain finance (SCF) in SMEs.
 Despite the fact that small and medium-sized enterprises (SMEs) in India account for over 62 million jobs and approximately 30 percent of the country's GDP, the great majority of them lack access to affordable loans from traditional banks. They are so often left with little choice but to resort to informal lenders, who charge usurious interest rates in order to meet their borrowing demands. Small and medium-sized enterprises (SMEs) are particularly vulnerable to the negative effects of the credit gap, which include but are not limited to higher costs, lower profits, slower growth, and a lack of resilience in the face of economic volatility (Iyer, 2021). Here, supply chain financing (SCF) could be helpful in bridging the trust gap by equipping lenders with more resources to manage credit risk and broadening the scope of financing to include vast pools of poorly understood MSMEs. SCF provides buyers and sellers with risk mitigation solutions based on technological advancements in order to reduce financing costs and increase company efficiency. Since SCF is still in its infancy, there is a pressing need to make this facility accessible to the vast majority of MSMEs so that they, in turn, can benefit from the positive effect it has on the performance of currently-adapted firms.

ESG Performance and Corporate Resilience: An Empirical Analysis Based on the Capital Allocation Efficiency Perspective

As China transitions from high-speed to high-quality economic development, the concept of sustainable development, particularly environmental, social, and governance (ESG), has emerged as a crucial consideration in corporate decision-making. This study examines the relationship between ESG performance and corporate resilience through the lens of capital allocation efficiency. Employing a fixed-effects model, heterogeneity analysis, and a mediation effect model, we analyzed 4436 A-share listed companies that were rated according to ESG standards by the China Securities Index (CSI) between 2011 and 2021. Our findings suggest that: (1) ESG performance positively impacts corporate resilience. (2) The magnitude of this effect varies based on the ownership structure and industry. Specifically, ESG performance has a more significant influence on non-state-owned companies and manufacturing companies. (3) Improving ESG performance can enhance corporate resilience through three mechanisms: reducing financing costs, improving investment efficiency, and improving operational efficiency.

How does blockchain technology affect the development of green finance? Theoretical analysis and empirical verification.

Facing the problem of a lack of endogenous incentive mechanisms for the development of green finance, we regard blockchain technology as an institutional technology and elevate it to the height of governance mechanisms. Using a dynamic stochastic general equilibrium (DSGE) model framework, we compare and analyze its effects with traditional supportive policies such as fiscal subsidies. The modeling simulation results show that the blockchain green finance platform model is conducive to better promoting the development of green finance. Subsequently, we construct a financial technology development index centered on blockchain technology and empirically test the impact of blockchain financial technology on the level of green finance development from both the supply and demand sides. The results show that the development of blockchain financial technology has significantly increased the scale of green credit issuance and effectively eased the financing constraints of green enterprises, reducing financing costs. We conduct an economic analysis of the impact of blockchain financial technology on the development of green finance, providing a feasible path for the integration and development of green finance and financial technology.

Green finance pilot reform and corporate green innovation

This study investigates the impact of the green finance pilot reform on corporate green innovation using the formation of the China Green Finance Pilot Reform in 2017 as a quasi-natural experiment. It shows that the green finance pilot reform increases corporate green innovation. Furthermore, by highlighting the differences between green enterprises and heavily polluting enterprises, it also shows that the positive relationship between the green finance pilot reform and corporate green innovation is more pronounced in green enterprises than in heavily polluting enterprises. The mechanism analysis shows that the green finance pilot reform mainly affects corporate green innovation by easing financing constraints and reducing financing costs. The heterogeneity analysis indicates that the positive relationship between the green finance pilot reform and corporate green innovation is more pronounced in non-state-owned enterprises and large-scale enterprises. As a result, the effect of the green finance pilot reform on corporate green innovation gives rise to certain green innovation incentives. It is thus necessary to optimise the external corporate governance environment by promoting the green finance pilot reform and further offers practical implications for corporate green innovation decision-making.

How Does Carbon Emissions Efficiency Affect OFDI? Evidence from Chinese Listed Companies

With the in-depth promotion of the “double carbon” strategy, the effectiveness of the green and low-carbon transition is not only fundamental to breaking the environmental shackles of domestic economic development, but is also an inevitable choice for Chinese enterprises to participate in international economic cooperation in the context of global climate change. However, the relationship between green low-carbon transition effects and outward foreign direct investment (OFDI) has not been adequately studied, and the transmission mechanism is not yet clear. Based on the above research gaps, this study made an empirical analysis on how carbon emissions efficiency affects companies’ OFDI using the OFDI data of China’s A-share-listed companies and matching carbon emissions efficiency data with the cities where listed companies are located, from 2007 to 2019. This study found that carbon emissions efficiency increases the possibility of OFDI, and carbon emissions efficiency significantly expanded the scale of OFDI through reducing financing costs and improving technological innovation, and the regression results are all significantly positive at the 1% level. We used ventilation coefficients as the instrumental variable, and the 2SLS results showed that this correlation is still robust. The heterogeneity analysis found that the role of carbon efficiency in promoting OFDI is more prominent for SOEs, large companies, clean companies and companies in competitive markets. In addition, financial development can positively moderate the influence of carbon emissions efficiency on OFDI, and carbon emissions efficiency deepens the embeddedness of the investment market compared to the degree of diversification of the corporate OFDI market. This research deepens the theoretical study on the factors of China’s OFDI, and provides insights for the government to coordinate carbon emissions efficiency and OFDI growth to achieve sustainable development. This study proposes continuing to promote clean production enterprises to shape their own sustainable development advantages, continuing to optimise the market environment and talent development environment, grasping the financing policy and technical support of the two important means, and accelerating the internationalisation of self-owned brands. These are the urgent priorities in driving Chinese enterprises to ‘go global’.

Effect of Cash conversion Cycle on Profitability: A case study of Binathman Household Supermarkets in Kenya

The objective of this research study is to investigate the relationship between the cash conversion cycle (CCC) and profitability in the context of Binathman Household Supermarket in Mombasa County. The study examines how the management of receivables, cash, payables, and inventories impact the supermarket's profitability. The literary examination scrutinizes antecedent research investigations that have explored the connection between managing working capital and profitability in various sectors. Theoretical frameworks, for example, the operating cycle theory and the trade-off theory of liquidity, give important insights into the variables that influence decisions on working capital and their impact on profitability. The study utilizes multiple linear regression analysis to evaluate the effect of inventory conversion, receivables conversion, and payables conversion on profitability. The study employs secondary data and measures profitability through return on assets (ROA). The research findings indicate a significant negative relationship between the cash conversion cycle and profitability. A shortened CCC leads to increased profitability by improving cash flow, reducing financing costs, and enhancing operational efficiency.

Value–Risk Calculator for Blended Finance: A Systems Perspective of the Nachtigal Hydropower Project

Hydropower as a renewable source can help many countries achieve their sustainable energy and climate goals, but large projects are challenging to finance because of their costs and risks. To fully realize the climate benefits of such projects, sponsors have recently fashioned complex financing arrangements that structure and allocate risks to reduce financing costs. This paper focuses on the blended financing approach adopted for the Nachtigal Hydropower Plant (NHP) in Cameroon. The purpose of the paper is to present a detailed systems analysis of Nachtigal’s financial arrangement to address the question of why the complex financing approach worked in practice. We accomplish this by creating a “financial simulator”—a computational model for evaluating risks and incentives embedded within the financing structure under different contract architectures and risk–event scenarios. Our simulator is a dynamic value–risk calculator that can be easily updated to study other climate-oriented projects that involve complex financial arrangements. We evaluated three aspects of the financing/contractual arrangements that made Nachtigal “bankable:” (i) guarantees that covered nonpayments, (ii) financial options on locally sourced loans; and (iii) an interest rate swap. We found: (i) the guarantees recovered project value threatened by four specific risks often associated with large hydropower investments (cost overruns, schedule delays, offtake risk, and low flow due to climate change); (ii) the mechanism significantly lowered interest rate charges; and (iii) private finance was mobilized—especially due to the options. The financial safeguards employed increased the likelihood of capturing the long-run sustainability benefits from NHP.

The impact of government support on firm innovation: Evidence from China

AbstractThis paper systematically analyzes the relationship between government support and private enterprise innovation. A firm‐level proxy for government support is derived based on Chinese context. Specifically, we explore whether and how government subsidies affect private firms' innovation output. We find that government subsidies can promote private enterprise innovation, and this impact will be further strengthened when firms face high level of financing constraints and when large shareholders pledge their equities. However, this impact will be weakened in regions with high marketization degree and good information environment. Further analysis shows that government support can have a positive impact on corporate innovation by increasing private firms' innovation input and reducing financing costs. Our study sheds new light on the role of government support by investigating the boundary conditions and exploring the impact channel of its effect. Also, this paper fills a gap in the research on the role of government support and the situational research by putting this issue in Chinese context.

Research on the Effect of Digital Inclusive Financial Technology on Reducing Costs for Small and Micro Enterprises

This article focuses on small and micro enterprises in the Yangtze River Delta region and analyzes the cost reduction effect of digital inclusive finance technology on small and micro enterprises. The research results show that the application of digital inclusive finance technology can significantly reduce the financing costs of small and micro enterprises. Based on the research results, this article proposes suggestions to improve the application level of digital inclusive financial technology, including strengthening the construction of digital infrastructure, implementing the "No.1 Project" of the digital economy, and promoting the digital intelligent transformation of small and micro enterprises. The research results of this article provide important theoretical and practical guidance for improving the efficiency of small and micro enterprises in obtaining financing and reducing financing costs, and provide valuable reference for the promotion and application of digital inclusive finance technology.

Facilitate or Inhibit: Corporate Environmental Performance and Financing Costs.

The proposed carbon peak and carbon neutralization goals have ushered China into an era of emissions reduction and a climate-oriented economy. With the proposed double carbon goal, China has formulated many environmental protection and green credit policies. This paper aims to assess the impact of corporate environmental performance (CEP) on financing costs, using a panel dataset of companies in China's heavily polluting industries from 2010 to 2019. We employed fixed-effect models, moderating-effect models, and panel quantile regression (PQR) to analyze the impact, underlying mechanisms, and asymmetric features of CEP on financing costs. Our results indicate that CEP has an inhibitory effect on financing costs, with political connections strengthening this effect and GEA weakening it. Moreover, the impact exhibits asymmetry at different levels of financing costs, wherein lower financing costs see a greater weakening effect from CEP. Improved CEP helps to optimize the financing performance of companies and reduce financing costs. Therefore, policy makers and regulatory authorities should work to unblock financing channels for companies, encourage environmental investment, and remain flexible in implementing environmental policies.

Effect of green credit policy on energy firms’ growth: evidence from China

The response of energy firms to green credit policy is of great significance, which is related to the emission reduction effect of green finance and transformation of energy firms. This paper analyzes the impact of green credit policy on the growth of energy firms based on the data of Chinese listed companies from 2009 to 2019. The empirical results show that green credit policy has significantly promoted the growth of energy firms. Further research shows that green credit policy promoted the growth of energy firms by reducing financing costs and promoting green innovation. Besides, the owned firms, big-scale firms and firms in central and eastern China are more susceptible to the impacts of the green credit policy. This study is relevant to the implementation of green credit policies and the promotion of the development and transformation of energy firms.

Corporate Digital Transformation and ESG Performance - Evidence from Chinese-Listed Companies

Corporate digital transformation provides the endogenous motivation to stimulate corporate ESG performance by helping companies to optimize innovation resource allocation and reduce financing costs. This paper empirically examines the impact and mechanism of corporate digital transformation on corporate ESG performance using Shanghai, and Shenzhen A-share listed companies from 2011-2021 as the research sample. It is found that digital transformation significantly enhances the ESG performance of enterprises, among which the performance of artificial intelligence is more prominent. This finding still holds after a series of robustness tests and endogeneity treatments. Taking the social spillover effects of digital transformation as the starting point, this paper provides empirical evidence and research insights to broaden the development path of Chinese enterprises to improve ESG performance and implement the "double carbon" goal.

Does the business environment promote entrepreneurship?——Evidence from the China Household Finance Survey

Drawing on data from the China Household Finance Survey and China's Urban Business Environment Index, this study examines the effects of the business environment on entrepreneurial behavior in China. The identification uses the instrumental variables approach to address possible endogeneity. The empirical results show that improving the business environment can create more employment opportunities, optimize the structure of employment, and promote entrepreneurship; in terms of different dimensions of the business environment, improvements in public services, the market environment, and the legal environment play a stronger role in promoting entrepreneurship; from the entrepreneurial process perspective, improving the business environment can significantly enhance entrepreneurial willingness, boost the “metabolism” of entrepreneurial groups, and increase individual entrepreneurial identity. Further analyses on the mechanism indicate that improving the business environment is conducive to individual entrepreneurship through the following four channels: (1) creating more entrepreneurial opportunities, (2) reducing operating costs, (3) reducing financing costs, and (4) improving contract enforcement.

Low-carbon transformation and corporate cash holdings

Based on the data of the A-share listed firms in China, this paper studies the relationship between low-carbon transformation and corporate cash holding decisions using a staggered difference-in-differences method (DID) with the implementation of the low-carbon pilot policy. The study finds that the low-carbon transformation reduces firms’ cash holdings. Channel testing documents that the low-carbon transformation reduces financing costs and increases government subsidies. The impact is mainly in firms with higher financial constraints, larger operating burdens and greater environmental concerns. In addition, the negative relationship improves firms’ research and development investment and corporate environmental responsibility.

RETRACTED: The construction of enterprise's financial supply chain management under blockchain technology

AbstractThis paper uses the advantages of blockchain technology to help construction enterprises obtain low‐interest bank loans, effectively reduce financing costs, thus improving the level of financial supply chain, innovating financial management (FM) of construction enterprises, solving the FM transformation problem of construction enterprises and promoting the sustainable development of construction enterprises, and thus doing the following work. First, this paper describes the concept and characteristics of BT and the motivation of FM of construction enterprises to use BT. Second, it analyses BT's three main application advantages in construction enterprise financing: reducing financial risks, improving the credit penetration of core enterprises, and reducing financing costs. Meanwhile, this paper summarizes the problems that should be paid attention to in implementing the current financial supply chain management strategy in enterprises. It provides a solid theoretical foundation for the research of FM transformation in construction enterprises. Finally, the overall design and functional analysis of the BT FM platform are carried out. The functions of the BT FM platform are divided into four modules: system management, credit management, contract management, and information management. Besides, their specific business processes are analysed. The research results show that BT is applicable in enterprises, and the value of each participant's financing platform can be clearly defined from the construction of BT‐based financing platform. The income quota of the owner's individual operation is 33%, and the income quota of the tripartite cooperation is also 33%, which further illustrates the effectiveness of the financial financing model of construction enterprises based on BT and the feasibility of its actual implementation in the future. In this paper, the related issues of financial supply chain management are systematically and comprehensively summarized, which has theoretical guiding significance for the research of FM transformation of construction enterprises based on BT.

ESG performance and banks’ funding costs

In this study, we explore whether and to what extent Environmental, Social, and Governance (ESG) factors impact banks’ funding costs. Using a sample composed of 493 banks located in 39 advanced and emerging economies over the 2003–2020 period, we find that banks benefit from incorporating ESG practices into financial decisions, enjoying lower costs of raising interest-bearing liabilities (total cost of funds), as well as reduced costs of attracting deposits. All ESG dimensions are responsible for this outcome in the case of total cost of funds, whereas for the cost of deposits the Environmental pillar appears to have an insignificant impact, suggesting that depositors do not value banks' environmental commitments, but rather their social performance and corporate governance quality. Furthermore, the empirical evidence indicates that only large banks and those located in developed countries reap the benefits of increased ESG performance in terms of reduced financing costs.

What factors affect corporate bond financing costs? -- Taking the corporate bonds of Shanghai and Shenzhen Stock Exchanges of China as an example

This paper focuses on the factors which influence the corporate bond financing cost. Based on the complexity and diversity of influencing factors of corporate bond financing costs, this paper discusses them from macro and micro dimensions. This paper discovers that PMI, a macroeconomic indicator, influences bond financing costs positively; the higher the PMI, the more prosperous the economy is, and the more expensive bond financing is. Other macroeconomic variables have varying effects on the financing costs of corporate bonds with various ratings and maturities. Among the individual bond characteristic variables at the micro level, the bond maturity, the issuer's asset liability ratio, and whether the bonds are guaranteed have a positive impact on the bond financing cost, while the bond issuance amount, the issuer's return on equity, and the issuer's corporate nature negatively affect the cost of bond financing. Therefore, the suggestions are: Firstly, for the governments, when PMI increases, it is necessary to introduce corresponding policies to reduce the financing costs of enterprises; Secondly, for the issuer, it should improve its ROE and reduce the asset liability ratio, select the appropriate bond covenants, and consider the macroeconomic situation to choose the appropriate time to issue bonds to reduce financing costs; Thirdly, for bond investors, they should pay attention to macroeconomic fluctuations, study bond covenants and financial indicators.

Can Fintech Alleviate the Financing Constraints of Enterprises?—Evidence from the Chinese Securities Market

Whether Fintech enabled by big data technology can improve the efficiency of credit allocation and how it would do has always been the focus in the capital market, especially the intermediary mechanism, which has not yet been convincingly explained. This paper empirically tests the logical relationship and micro mechanism between Fintech and the corporate financing constraint dilemma by using the data of China’s A-share non-financial listed companies from 2011 to 2018. The research found that Fintech has a significant mitigation effect on corporate financing constraints, and the coverage capability of Fintech has a stronger mitigation effect compared to the depth of use. Mechanism research shows that the “technology enabling” role of Fintech can alleviate the financing constraints of enterprises by reducing the degree of information asymmetry between capital supply and demand sides and reducing financing costs. Heterogeneity research shows that the mitigation effect of Fintech on corporate financing constraints is more significant in enterprises with private property, non-main board listing, senior executives with high financial literacy, and enterprises with strong competitive positions in the industry. Further research shows that, in order to identify the impact of Fintech on corporate financing types under an environment without internal control defects, Fintech enables enterprises facing financing constraints to obtain more commercial credit and bank loans; at a time when it is difficult to obtain bank loans, commercial credit has become an alternative financing method of bank loans, promoting the transfer of credit resources from traditional mortgage guarantees to enterprise commercial credit. This study provides a perspective for the research on how Fintech alleviates corporate financing constraints, and it reveals the characteristics of digital empowerment in the development of China’s capital market, providing a theoretical basis and evidence supporting the formulation of relevant policies.

Can blockchain technology be effectively integrated into the real economy? Evidence from corporate investment efficiency

As a highly disruptive digital technology, blockchain provides new solutions for reshaping corporate governance mechanisms and improving resource allocation. We empirically examine the relationship between blockchain and corporate investment inefficiency. We find that blockchain can help improve corporate investment efficiency, and this result is valid after a series of robustness tests. Blockchain can not only significantly restrain overinvestment but also alleviate underinvestment. Reducing financing costs and alleviating agency conflicts are the two channels through which blockchain is associated with corporate investment efficiency, and financial reporting quality is the condition on which the channels depend. When the CEO holds few shares or the trade credit environment in the region where the company is located is poor, the effect of blockchain is more prominent than it is otherwise. Investment efficiency cannot be improved by blockchain for companies providing blockchain products or services to customers, only for those promoting their own operations and management with blockchain. Ultimately, blockchain can enhance companies’ value by alleviating inefficient investment. We reveal the role of blockchain in corporate investment efficiency, furnish microeconomic evidence for the integration of digital technology and the real economy and provide implications for China to promote digital technology to drive high-quality company development.