Supply Chain Finance: An Early Empirical Examination

Abstract

This study examines the impact of supply chain finance (SCF) responding to growing interest from accounting regulators. We examine how SCF affects the payment period between buyers and suppliers using two distinct data sources. First, using a proprietary dataset from an SCF provider, we find that on average the payment period becomes 70% longer after a buyer adopts SCF. Second, using a sample of newly mandated disclosures from US firms, we find that compared to non-SCF buyers, SCF buyers on average take 64% longer to pay their supplier invoices. Additionally, we observe a positive stock market response to disclosures of SCF adoption, suggesting that investors expect favorable financial outcomes for SCF. Further, suppliers engaged with SCF buyers experience shorter days sales outstanding, indicating mutual benefits. Our research contributes to the limited literature on SCF and provides timely insights about its effects to various parties, including regulators, buyers, suppliers, and investors.

Keywords: supply chain financing, reverse factoring, trade credit, accounting standards, supply chain

JEL Classification: G21, G23, L14, M41