Supply Chain Relationship,Trade Credit Finance And Firm Value

With the increase of global competition and development of information technology,supply chain alliance gradually becomes the strategic direction of the enterprises,the relationship between enterprises in the supply chain has gradually changed from competition with each other to supportive cooperation mutually,enterprises use complementary technology and resources to obtain a larger market share.Through cooperation in the supply chain,enterprises can exchange information more smoothly,companies can arrange the production,ordering,delivery behavior more efficiently,and owing to the common goals in the same supply chain,enterprises share the common benefits,so they can use their superior resources mutually to jointly research,and achieve strategic alliance.The whole supply chain's power can greatly enhance through the supply chain alliance,each company in the supply chain can gain greater benefits,and the whole supply chain can achieve the goal of "1 + 1> 2." Therefore,how to manage the supply chain better,and achieve the collaboration of supply chain has become the focuses of managers and scholars.Company's suppliers,customers and the company itself constitute the basic model of supply chain,suppliers offer raw materials to the company,and the company sells goods or provides services to its customers,therefore,the company's relationship with its suppliers and customers will greatly affect its production and operation.Now,companies' s selection of their suppliers and customers has gradually changed from decentralization to centralization,companies select several suppliers to purchase centrally,and select several customers to meet their needs better,the concentration of suppliers and customers increases.There are many advantages of the suppliers' and customers' centralization,it is beneficial to the formation of alliances,the information exchange can be more smoothly,and companies in supply chain can achieve joint research and development,supplies and customers may provide trade credit finance support based on the motivation of reducing the company's financial constraint,reducing transaction cost,carrying out price discrimination and so on,it reflects a strong cooperative relationship between the company and its suppliers,as well as with its customers.But the increase of the supplier concentration and customer concentration may enhance the company's dependence to its suppliers and customers,thus reduce the company's bargaining power,the suppliers may require the company to make payments timely,even advance payment,the customers will ask the company to provide more credit,so the company's trade credit finance decreases,it reflects a strong competition relationship between the company and suppliers,as well as the company and customers.Therefore,the first purpose of this paper is to study the impact of supply chain relationships to trade credit finance,in which situation the company reflects a competitive relationship with its suppliers and customers,and in which situation it reflects a cooperative relationship.The company deferrers payments to its suppliers,and asks advanced payment of its customers to obtain trade credit finance,the trade credit finance is equal to a short term loan offered by its suppliers and customers,it can ease the company's financial constraints,the company can use the trade credit to finance inventory,fixed assets,intangible assets,R&D investment to enhance the competitive power of itself,thereby enhancing its firm value.Trade credit finance is an important mechanism in the company's transaction with its suppliers and customers,which will play an important role in the supply chain relationships influencing the firm value.Therefore,the second purpose of this paper is to study the mechanism on how supply chain relationships influence the firm value through trade credit finance,supply chain relationships will influence the trade credit,and further influence the firm value.In this paper,we use Chinese 2007——2014 A-share listed companies as a sample,and investigate how the supply chain relationships affect trade credit finance,and how the trade credit finance affect firm value,specifically,the supply chain relationships include the relationship between the company and the suppliers,the relationship between the company and the customers,and the triad relationship among the company,suppliers,and customers.The main conclusions are as followed:First,through empirical test on how the supply chain relationships influence company's trade credit finance,we find that:(1)the higher the supplier concentration,the lower the company's trade credit finance,but when the company faces a relatively large financial constraint,the relationship between the suppliers and company will change from competition to cooperation,and company's trade credit finance will increase.(2)the higher the customer concentration,the lower the company's trade credit finance,but when the company faces a relatively large financial constraint,the relationship between the customers and company will change from competition to cooperation,and company's trade credit finance will increase.(3)When the supplier concentration and customer concentration are both high,the triad cooperative relationship among the company,suppliers and customers will increase,the company's trade credit finance will increase,and when the company is financial constrained,the triad partnership will be stronger.These conclusions are derived from the joint effect of cooperative relationship and competitive relationship between the company and customers,company and suppliers,when the company's supplier concentration or customer concentration is high,the company's dependence to its suppliers and customers will increase,so the bargain power of the company will be weak,at this time the competitive relationship will play a major role,suppliers will ask the company to make timely payment,even advanced payment,customers will ask the company to give more credit,the company's trade credit finance will decrease.But when the company faces a high degree of financial constraint,the relationship between the company and suppliers,the company and customers will change from competition to cooperation,the suppliers and customers will expect to keep a long-term relationship with the company,and provide the company trade credit finance support,the company's trade credit finance will increase.In addition,when the supplier concentration and customer concentration are both high,suppliers and customers will predict the company's liquidity may be occupied by the other supply chain enterprise,so they will all provide the company trade credit finance support at the same time,the triad cooperative relationship will increase,the company's trade credit finance will increase.Secondly,through empirical test on the connection among supply chain relationships,trade credit finance and firm value,we find that:(1)trade credit finance can enhance firm value.(2)Supply chain relationships will influence firm value through trade credit finance,the trade credit finance plays an intermediary role.Conclusions drawn above are due to trade credit finance's economic value,trade credit finance can ease company's financial constraints,so the enterprises have sufficient cash to invest to inventories,fixed assets,R&D and so on,expand firm's operating scale,enhance firm's innovation and competitive power,and thus enhance the firm value.When the supply chain relationship is competitive,the suppliers and customers expect to embezzle more liquidity from the firm,firm's trade credit finance will decrease,even become negative,companies do not have sufficient fund for production and investment,the firm value will decrease;when the supply chain relationship is cooperative,the suppliers and customers expect to achieve long-term development with the company,they will provide trade credit finance support to the company,firm's trade credit finance will increase,the company can increase investment,and manage inventory and cash flow better,the firm value will increase.In this paper,we have some contributions from the theory and practice:First,from the theory aspect,the contributions of this paper are as followed:(1)This study enriches the research on how supply chain relationships affect trade credit finance,previous studies about supply chain relationship are only from the perspective of cooperation or competition,but under what circumstances the relationship is competitive,under what circumstances the relationship is cooperative has not been adequately studied,this study finds that when the company is operating well,there is a strong competition between the company and its suppliers,the company and its customers,but when the company faces a high degree of financial constraints,the relationship will change from competition to cooperation,company's trade credit finance will increase.(2)This study enriches the study of triad supply chain relationship,previous studies are only from the view of suppliers or customers,but the study that place the suppliers,customers and company under the same frame is rare,this paper finds that there is an integration between the suppliers and customers when they both deal with the same company,and the triad relationship can enhance cooperation than dyadic relationship in supply chain.(3)This study enriches the mechanism study on how the supplier chain relationship affects the firm value,previous studies about the mechanism focuses on reducing transaction costs,enhancing transparency,reducing risk and so on,but from the perspective of trade credit finance is rare,this paper finds that supply chain relationship will affect firm value through trade credit finance,and trade credit finance will play an intermediary role in the above relation.Secondly,in practice,this study can provide guidance to managers on how to better manage supply chain relationships to get more trade credit finance,and how to make use of trade credit finance more efficiently to enhance the firm value.First,companies should build the supplier and customer relationship at the same time,form the mutual restraint between suppliers and customers,and promote the realization of triad partnership.Second,when the company's finance constraint is high,the company can't obtain loans from banks or other financial institutions,it can turn to its suppliers and customers to obtain trade credit finance,suppliers and customers will take the long-term cooperation as a precondition,provide trade credit finance support to the company.Third,companies should not only focus on their suppliers for trade credit finance,but also pay attention to the trade credit finance in customer transactions,the timely payments and advanced payments from their customers are important sources of firm's trade credit finance.