Global supply chains and cross-border financing

This paper provides evidence that the formation of global supply chain partnerships leads to an increased usage of cross-border financing. The findings are detected in all three major financing markets—equities, syndicated loans, and public debt. Difference-in-differences tests allow us to draw a causal interpretation of our main findings, which also holds in several robustness tests. Our findings suggest that increased cross-border financing reflects greater ability to access global financial markets, due to enhanced firm visibility and investor attention, as well as operational forces that arise when establishing new global supply chain partnerships. Specifically, we provide evidence that firms that are small, held less by institutional investors, and followed by fewer analysts have more benefits in cross-border financing from the formation of the global supply chain. Our findings have important implications for firms attempting to integrate into the global supply chain network. More broadly, our findings suggest that the information generated by operational activities can have significant effects on subsequent financing activities.