How Does a Social Credit System Affect Supply Chain Risk: Evidence from China

This paper exploits the staggered establishment of 43 social credit system pilot cities across two batches in China (2015 and 2016) as a quasi-natural experiment to examine the effect of institution-based trust on firm-level supply chain risk. Using data on Chinese A-share listed firms over the period 2007–2022 and employing a staggered difference-in-differences (DID) approach, we find evidence that the construction of China’s social credit system is associated with lower corporate supply chain risk, with the baseline estimate equivalent to approximately 7.93% of the sample mean. Channel analyses associate social credit system construction with greater supply chain diversification and an improved net trade-credit position. Exploratory subgroup analyses yield more negative point estimates in regions with higher marketization and among firms with lower observed environmental uncertainty. Our findings suggest a potential role of institution-based trust in supply chain risk management and have implications for corporate managers and policymakers.