Risks associated with digitalization and supply chain finance: empirical data from Indian listed construction companies

Purpose This study aims to investigate the impact of digital transformation on supply chain finance (SCF) risks in the Indian construction sector, a context characterized by high working capital intensity, large upfront payments and frequent liquidity mismatches. Design/methodology/approach Using a panel dataset of Indian listed construction companies (2012–2024), sampled through purposive selection of firms consistently engaged in SCF arrangements, the study employs panel regression techniques with robustness checks (alternative variable specifications, fixed effects and instrumental variable estimation) to establish causal inference. Findings Results show that digitalization significantly reduces SCF risks, with the effect being stronger for firms exhibiting weaker corporate governance. Mechanism analysis reveals that digital adoption enhances operational efficiency (measured via EBIT margins) and improves information transparency (proxied by timely disclosures and audit lags), thereby lowering financing costs and risks. Practical implications The findings offer actionable insights for policymakers and industry leaders. For practitioners, investing in digital systems can mitigate financing constraints, reduce default risks and strengthen supply chain stability. For policymakers, initiatives such as digital tax incentives, e-invoicing mandates and IT training subsidies can accelerate digital adoption in construction, supporting India’s infrastructure ambitions. Originality/value Unlike prior studies that primarily examine manufacturing or cross-sectoral data, this research uniquely focuses on the Indian construction industry – an environment marked by payment delays, fragmented supply chains and governance weaknesses. It demonstrates how digitalization can act as a partial substitute for formal governance mechanisms in high-friction markets, contributing new insights to the intersection of supply chain finance, digitalization and corporate governance.