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1. Introduction
Economic environment is characterized by different challenges such as competition, uncertainty, market turbulence and innovations (Swafford et al., 2006; Yang, 2014). To achieve performance, further scholars proposed that organizations need to adopt effective measures which help them to generate significant performance (McCarthy et al., 2017; Aslam et al., 2018).
Recently, a new financing strategy called “supply chain finance (SCF)” has been adopted by many lenders and financial institutions (FIs), which helps organizations to optimize their working capital for obtaining the superior operational and financial performance. SCF is deriving attention of organizations as a new approach of strengthening the credit accessibility (Wang et al., 2013).
SCF can improve organizational performance (OP) by encouraging longer payment terms while offering better receivable facilities (Wuttke et al., 2016; Beka Be Nguema et al., 2021).
Tanrisever et al. (2012) emphasized that organizations use SCF to expand their payment terms and acquire more exchange credit to enhance their working capital. SCF significantly modified the way of doing business by offering the risk-free credit facilities to the supply chain members for the smooth functioning of supply chains (Basole and Bellamy, 2014). Hence, SCF dynamically improved the business financial environment because of its nature of low capital cost and low risk-taking.
Song and Wang (2013) emphasized that organizations with a high level of financial risk encourage their managers to use different financial solutions for achieving the organization’s working capital requirements. In fact, the organizations which produce innovative products typically need more credit as compared to other kinds of organizations (Ali et al., 2019a). Traditionally, for granting credits, FIs such as banks regularly require security to mitigate the financial risks (Duan et al., 2009) which affect the performance of organization or cause pressure on their functions. To solve specific issue, a rising stream of practice and research on SCF has significantly improved the liquidity and working capital of organization (Pfohl and Gomm, 2009). Recently, SCF performs as a strategy for facilitating financial management inside the organization’s supply chain (Gomm, 2010). However, little is known about its dual impacts such as risk mitigation and working capital optimization. The purpose of this paper is to investigate whether SCF improves organization performance and mitigates supply chain risk...