The purpose of this paper is to theoretically hypothesise and empirically test the impact of sustainable supply chain practices (SSCPs) on firms’ financial risk.
This research adopts signalling theory to explain the signalling role of SSCPs and the moderating role of the signalling environment in terms of supply chain characteristics. It collects and combines longitudinal secondary data from multiple sources to test the direct impact of SSCPs on firms’ financial risk and the moderating role of supply chain complexity and efficiency. It conducts various additional tests to check the robustness of the findings and to account for alternative explanations.
This research shows that SSCPs help firms reduce financial risk but do not affect their returns. Moreover, the risk reduction of SSCPs is greater for firms with more complex and efficient supply chains. The findings are robust to alternative variable measurements and analysing strategies.
This research reveals the role of SSCPs in reducing financial risk, urging researchers to pay more attention to the financial risk implications of supply chain practices in general and SSCPs in particular.
This research encourages firms to engage in SSCPs to reduce financial risk and enables them to assess the urgency of their SSCPs investments in view of the complexity and efficiency of their supply chains.
This is the first research examining the impact of SSCPs on financial risk, based on longitudinal secondary data and signalling theory. The empirical evidence documented and the theoretical perspective adopted offer important implications for future practice and research on SSCPs.
