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This study explores the intricate relationship between inventory leanness, financial constraints and digital transformation in listed Chinese manufacturing firms.

Using a large panel data collected from 2,563 Chinese listed manufacturing enterprises over the period from 2012 to 2021, this research employs the instrumental variable method combined with two-stage least squares estimators to explore the U- shaped relationship between inventory leanness and financial constraints. Furthermore, the moderating role of digital transformation is demonstrated.

Contrary to traditional assumptions, our research uncovers a U-shaped relationship between inventory leanness and financial constraints, indicating that excessive inventory reduction can exacerbate financial constraints. Digital transformation plays a significant moderating role, particularly in highly digitalized environments.

Our findings have practical significance for top managers and policymakers. We advocate for a balanced approach to lean inventory management to mitigating financial constraints. The study emphasizes the pivotal role of digital transformation in alleviating the impact of inventory leanness on financial constraints, highlighting the need for digital transformation strategies.

This research provides a comprehensive analysis of inventory leanness, financial constraints and digital transformation dynamics. It challenges conventional thinking by revealing the nonlinear nature of the inventory leanness–financial constraints relationship. The concept of moderation highlights the moderating effect of digital transformation. This study offers practical guidance for practitioners and policymakers.

The current study aims to investigate the mediating role of executive stock options in the nonlinear relationship between financial constraints and research and development (R&D) investment through two measures of financial constraints.

This study is based on a sample of 90 French firms for the period extending from 2008 to 2020. The authors employ a panel threshold method to analyze whether the impact of financial constraints on R&D investment depends on the level of financial constraints or not.

Using SA index (Hadlock and Pierce, 2010) and FCP index (Schauer et al., 2019) as measures of financial constraints, the authors demonstrate that the relationship between financial constraints and R&D investment is nonlinear. Moreover, the authors find that executive stock options mediate partially the relationship between financial constraints and R&D investment. More specifically, the authors show that stock options could play two roles depending on the level of the financial constraints; inconsistent mediation for firms with low/medium level of financial constraints and partial mediation for highly constrained firms.

This paper is the first to the best of the authors' knowledge to investigate the nonlinear relationship between financial constraints and R&D investment as well as the mediating role of executive stock option using dynamic panel threshold models.

This study aims to empirically examine the influence of financial constraints on firm carbon emissions. In addition to the role of financial constraints in firm-level carbon emissions, this study also examines this influence in the presence of governance, environmental orientation and firm-level attributes.

Using pooled ordinary least square, this study examines the impact of financial constraints on firm-level carbon emissions using a panel of 1,536 US firm-year observations from 2008 to 2019. This study also used two-step generalized method of moment–based dynamic panel data and two-stage least square approaches to address potential endogeneity. The results are robust to endogeneity and collinearity issues.

The results suggest that financial constraints enhance the carbon emissions of the firms. The economic significance of financial constraints on carbon emissions is more pronounced for the firms that do not report environment-related expenditure investment and those that are highly leveraged. The authors further document that firms with a nondiverse gender board signify a statistically significant impact of financial constraints on carbon emissions. These results are also economically significant, as one standard deviation increase in financial constraints is associated with a 3.340% increase in carbon emissions at the firm level.

Some implicit and explicit factors like corporate emissions policy and culture may condition the relationship of financial constraints with carbon emissions. Therefore, it would be worthwhile to consider these factors for future research. In addition, it is beneficial to identify the thresholds and/or quantiles at which financial constraints may significantly make a difference in enhancing carbon emissions.

The findings offer policy implications for investment in stakeholder engagement for capital acquisitions, thereby effectively enforcing environmental innovation and leading to a reduction in carbon emissions.

This study integrated governance and environment-oriented variables in the model to empirically examine the role of financial constraints on the carbon emissions of the firms in the USA over and above what has already been documented in the earlier literature.

The purpose of this paper is to examine the impact of working capital management (WCM) on profitability under different financial conditions (constraint/unconstraint) and WCM policy (aggressive/conservative). Furthermore, the study investigates the existence of optimal working capital levels under different financial conditions and WCM policy.

Two-step system generalized method of moments and fixed effect models are used to analyze the data collected from Prowess database from 2011 to 2020 for a sample of 1,104 Indian manufacturing companies.

The study finds an inverted U-shaped relationship between working capital and profitability in all financial conditions and working capital policy. This finding advocates the existence of an optimal level of working capital that equates the costs and benefits of holding working capital to maximize the companies’ profitability. However, holding working capital beyond the optimal level negatively affects profitability. Companies under financial constraints with aggressive working capital policies have the lowest optimal cash conversion cycle (CCC). Furthermore, the relationship of working capital with profitability and the optimal CCC varies owing to firm age and industry group.

To the best of the authors’ knowledge, this is the first paper that incorporates the impact of working capital on firm’s performance from both financial constraint (unconstraint) and aggressive (conservative) working capital policy perspectives in the Indian context. Furthermore, this study also contributes in terms of reflecting the effect of firm age and industry in determining the optimum CCC of the firms.

The purpose of this research is to examine the impact of corporate governance proxies by ownership structure on financial constraints for a sample of 215 non-financial Pakistan Stock Exchange (PSX) listed firms between 2010 and 2018.

The dynamic generalized method of moments (GMM) estimator is used to determine the influence of ownership structure on financial constraints. The ownership structure of sample enterprises is measured using seven variables: managerial, family, institutional, foreign, associated, presence of block holder, and concentrated ownership, while financial limitations are determined using the KZ Index. The WW Index is used to assess the robustness of the results. In addition, for robustness, we also used OLS and FE.

Based on the system GMM results, it was discovered that firm ownership structure has a significant impact on the likelihood of financial constraints. In the case of Pakistan, the results show that institutional ownership, foreign ownership, and the presence of a block holder in the ownership structure have a significant negative impact on financial constraints, whereas family ownership and ownership concentration have a significant positive impact. This finding remains true when financial constraints are measured using the WW Index.

The findings of the study provide business managers and investors with more information regarding the relationship between corporate governance quality and the degree of financial constraint in Pakistani firms. Furthermore, this study contributes new information from emerging nations like Pakistan to the existing literature, which will help regulatory bodies and policymakers build long-term corporate governance solutions to manage financial constraints. It is well established that improving the quality of corporate governance practices improves capital market efficiency and lowers the likelihood of financial constraints.

The study adds to the body of existing work on corporate governance and the possibility of financial constraints, with a focus on Pakistan. The findings show that when projecting company financial constraints, regulators should pay special attention to the quality of corporate governance, specifically ownership structure.

Previous studies have produced inconsistent findings regarding the effects of resource constraints on corporate illegal behavior. This study aims to explore how entrepreneurial firms can overcome the difficulties generated by resource constraints.

Drawing on insights from general strain theory and focusing on listed entrepreneurial firms, this study proposes that failure to obtain enough resources through listing generates strain in the managers of listed entrepreneurial firms, driving them to resort to corporate financial fraud as a solution. Nevertheless, such relationships between resource constraints and the likelihood of corporate financial fraud can be weakened by innovation capability, because innovation capability can generate more confidence in their managers and relieve their strains, thereby dissuading them from engaging in corporate financial fraud.

According to our empirical results, both financial and human resource constraints are positively related to the likelihood of corporate financial fraud in listed entrepreneurial firms, but such effects can be mitigated by innovation capability.

This study provides practical implications for both regulators and managers by indicating that although entrepreneurial firms with resource constraints are more likely to commit financial fraud, innovation capability could be a strategic approach to enhance managers’ confidence and relieve the strain.

Our study contributes to the literature by enriching our understanding of the consequences of resource constraints in entrepreneurial firms and highlighting the strategic importance of innovation capability in mitigating such effects.

This paper first examines how changes in the real effective exchange rate and its volatility affect the exporting activities of firms. Next, it investigates whether exchange rate volatility (EXRV) affects the export behavior of financially constrained and unconstrained firms differently. Finally, it examines the role of financial development in mitigating the effects of EXRV and financial constraints on firms' exports.

The empirical analysis of the paper is based on a wide panel of Pakistani nonfinancial firms listed at the Pakistan Stock Exchange during the period 2001–2016. To mitigate the problem of endogeneity and to take into account the dynamic nature of the empirical model, the authors apply the robust two-step system-GMM estimator developed by Blundell and Bond (1998). To examine the role of credit constraints, firm-year observations are sorted as financially constrained and unconstrained based on the median value of three alternative measures: the liquidity ratio, the dividend payout ratio and the Whited and Wu (WW) index.

The results reveal that an increase in the real effective exchange rate has a positive and significant impact on firms' exports. However, the results show that the EXRV is significantly and negatively related to exporting decisions, suggesting firms considerably decrease their exports during periods of increased unpredictable variations in exchange rates. The findings also suggest that compared to financially constrained firms, the adverse effect of EXRV on exports is weaker for financially unconstrained firms. This finding implies that firm-level financial constraints unfavorably impact exports by making exporting more sensitive to the EXRV. Finally, the findings indicate that financial development not only positively affects firms' exports but also plays a vital role in declining the adverse effects of EXRV on firm-level exports. Specifically, the results show that financial development decreases the negative impact of EXRV on exports for both financially constrained and unconstrained firms. However, the moderating role of financial sector development is higher for financially unconstrained firms.

Notwithstanding that the authors present robust and strong empirical evidence of the effects of EXRV on exporting and on the role of both firm-level financial constraints and financial sector development in formulating these effects, there are some limitations of the study. The authors use a single proxy for measuring financial sector development. However, one may construct an index for the financial sector developed using principal component analysis (PCA) by considering different measures of financial development. The authors use three different measures of financial constraints. Nonetheless, more sophisticated techniques such as switching regression can be used to endogenously determine whether firms are financially constrained. Moreover, an examination of the asymmetric effects of EXRV on exporting across different industries would also be worthwhile.

From a policy point of view, the results suggest that the development of the financial sector and the strategies to lessen credit constraints faced by firms will help in mitigating the adverse effects of the EXRV on the exporting behavior of firms in Pakistan. The findings also suggest that managers in financially constrained firms should apply appropriate hedging strategies to hedge exchange rate risks. Finally, the findings suggest that investors should take into consideration exchange rate dynamics and firms' financial constraints while investing in exporting firms' stocks.

Since the findings suggest that financially constrained firms' exports are more exposed to EXRV, managers of such exporting firms are suggested to apply effective and suitable currency risk-minimizing hedging instruments for enhancing their exports. The government should also implement economic and financial policies in such a way that they should help in reducing volatilities of exchange rates and in turn, encouraging firms to export more. Definitely, any policy, at both government and firm level, favoring exporting and export-oriented growth will not only help in overcoming the problem of a persistent and wide trade deficit but also help society by providing more employment and investment opportunities.

Recently, Pakistan has experienced significant declines in foreign reserves, persistent political unrest and enlarged trade deficits. All these have increased the uncertainty about the exchange rate. Therefore, it is valuable to know the EXRV effects on firms' exporting activities. Second, Pakistani firms face more financial constraints, and thus, the influence of financial constraints in formulating the volatility effects on exporting would be worth exploring. Finally, no research has yet taken place to scrutinize the role of financial development in mitigating the adverse effects of EXRV and financial constraints on exporting activities. This paper provides firsthand empirical evidence on the role of financial constraints and financial sector development in formulating the EXRV impacts on firm-level exports in Pakistan.

Existing studies that documented the effect of financial distress on trade credit provisions did not include measures financial constraint. It is possible that financial distress is tie to financial constraints, and both financial distress and financial constraints mutually reinforce each other in their effects on trade credit provision. The purpose of this study is to evaluate the effects of financial constraint and financial distress on trade credit provisions in the UK FTSE 350 listed firms.

This study employs panel data in the estimation of the determinants of accounts payables and accounts receivables of the UK FTSE 350 firms from 2009 to 2017.

This study finds that financial distress has significant positive effect on accounts payables and a significant negative effect on accounts receivables. Financial constraints have significant negative effect on accounts payables and a significant positive effect on accounts receivables.

Trade creditor desiring to maintain an enduring product-market relationship grant more concessions to customer in financial distress. The amount of trade credit that sellers provide to financially constrained firm is an increasing function of the buyer's creditworthiness. The urgent cash needs of financially distressed firms lead them to sell trade receivables to factoring company leading to reduction in trade receivables. Firm facing external financing constraints increase trade credit to customers in anticipation of cash flow inflow to enhance liquidity.

This study shows that financial distress and financial constraints mutually reinforce each other in their effects on trade credit provisions, and firm's financing condition contributes to divergence in trade credit policies.

The purpose of this study is to examine the nonlinear relationship between financial constraints and the chief executive officer (CEO) stock options compensation and to analyze whether the impact of financial constraints on the CEO stock options compensation changes at certain level of financial constraints or not.

This study is based on a sample of 90 French firms for the period extending from 2008 to 2019. To deal with the non-linearity, the authors use a panel threshold method.

Using different measures of financial constraints [KZ index (Baker et al., 2003), SA index (Hadlock and Pierce, 2010) and FCP index (Schauer et al., 2019)], the results reveal that the impact of the financial constraints (SA index and FCP index) is positive below the threshold value and it becomes negative above.

The non-linearity between financial constraints and CEO stock options shows that the level of financial constraints can be a major determinant of the CEO compensation structure. More specifically, this study sheds light on the key role played by the level of financial constraints and how this latter influence management decisions.

This paper is the first to the best of the authors' knowledge to examine the nonlinear relationship between financial constraints and the CEO stock options compensation using a panel threshold model.

The Micro, Small and Medium Enterprises (MSMEs) counter numerous financial obstacles concerning business financing and cash flow management. The study, therefore, intends to examine the level of perceived severity of financial constraints on the business growth of enterprises, in terms of sales, profitability and asset growth. An attempt is made to study the influence of owner and firm attributes as the determinants of financial constraints faced by MSMEs.

The data were collected from MSME owners of Northern India through a self-administered questionnaire. In total, 213 responses were analysed using partial least squares-structural equation modelling (PLS-SEM) technique through SmartPLSv2.

The findings advocate the role of owner and firm attributes in the severity of financial constraints experienced by the MSME owners. Most importantly, the study establishes a strong link between owner and firm attributes and cash flow constraints. Further, the paper confirms the negative influence of financing and cash flow problems on the growth of the firm.

The evaluation and categorisation of perceived financial challenges into meaningful dimensions generate value to the problematic area of MSME operations. Thus, the findings are useful for the policymakers and researchers to contemplate the financial vulnerability of MSMEs.

The empirical findings of the present study add worth to the limited evidence of the relationship between owner and firm attributes and severity of cash flow constraints faced by the Indian MSME owners.