Capital constraint firms' blockchain investment and bank financing production strategy

CHENG Yuxiang, WANG Yiming, CHEN Bin

Systems Engineering - Theory & Practice ›› 2025, Vol. 45 ›› Issue (1) : 36-53.

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Systems Engineering - Theory & Practice ›› 2025, Vol. 45 ›› Issue (1) : 36-53. DOI: 10.12011/SETP2022-2329

Capital constraint firms' blockchain investment and bank financing production strategy

  • CHENG Yuxiang1, WANG Yiming1, CHEN Bin2
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Abstract

Blockchain technology changes the current financing channel of firms. It would help firms to solve the financing difficulties. This article considers a bank financing model to analyze the firm's optimal production strategy and investment of blockchain technology when the market demand is stochastic. The article also discusses the different decisions in three types of firms (the firm that initial capital to invest in the blockchain is relatively sufficient, the firm that initial capital to invest in the blockchain is insufficient, and the firm with no blockchain investment). In our model, we find that the firm's profit, production, and blockchain investment decision would be affected by initial capital, the bank interest rate, and the bank's interest rate discount coefficient of the blockchain investment. The article finds that with the difference in the level of investment efficiency and the level of profitability of the company, blockchain investment has an adverse impact. Besides, the stimulated market demand generated by blockchain investment can reduce the risk of firms' loan default. The article finds that blockchain investment can create huge value for firms and reduce actual financing costs. Moreover, the article identifies the different impacts of market risk on firm decisions. This work gives managerial insights into firms' financing and production strategy when investing in blockchain technology. The paper also finds that the discounts of interest rates and blockchain investment interest rates formulated by banks would play a guiding role in firms' production.

Key words

financing / market risk / blockchain investment / corporate finance

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CHENG Yuxiang , WANG Yiming , CHEN Bin. Capital constraint firms' blockchain investment and bank financing production strategy. Systems Engineering - Theory & Practice, 2025, 45(1): 36-53 https://doi.org/10.12011/SETP2022-2329

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