Supply chain finance, financing constraints and financial performance of SMEs in China

This thesis examines whether supply chain finance (SCF) alleviates financing constraints and improves financial performance among Chinese small and medium-sized enterprises (SMEs), using listed firms on the National Equities Exchange and Quotations (NEEQ) as an empirically tractable and policy-relevant SME segment. Grounded in a credit-risk perspective, the thesis argues that SCF can ease SMEs’ financing constraints by improving the verifiability of underlying transactions and strengthening credit support within supply-chain relationships, thereby enhancing liquidity access and reducing external financing costs. Using firm-year panel data for NEEQ-listed SMEs over year 2016–2022, the study employs two -way fixed-effects panel regressions with rigorous robustness checks and endogeneity diagnostics. Across specifications, the results provide consistent evidence that stronger SCF engagement is associated with a meaningful reduction in SMEs’ financing constraints and an improvement in financial performance. Heterogeneity analyses further indicate that the constraint-relief effect is particularly evident in the tertiary sector, and it becomes more pronounced during the COVID-19 outbreak period. Performance improvements are stronger among non-state-owned firms and appear more substantial before the pandemic. The thesis further shows that digital financial inclusion and firm-level digital transformation strengthen SCF’s financing-constraint-relief effect, while corporate sustainability development exhibits a weaker and less robust moderating role in this channel. For financial performance, digital transformation and sustainability development play more salient moderating roles, whereas the contribution of digital financial inclusion is more period-dependent. Overall, this thesis contributes to the SCF and SME finance literature by offering a credit-risk perspective on SCF effectiveness, providing large-sample evidence from China’s NEEQ market, and clarifying how digital and sustainability capabilities condition SCF’s real effects. Policy implications highlight the importance of strengthening anchor-firm participation, digital infrastructure and data governance, and targeted SCF support for financially constrained SMEs.