Supplier Concentration Information Content for Future Earnings: Empirical Evidence from Chinese Listed Companies

Xili Yang; Dongwei Shi

doi:10.54691/3j9txj18

Authors

Xili Yang Management School, Sichuan University of Science & Engineering, Zigong, 643000, China
Dongwei Shi Management School, Sichuan University of Science & Engineering, Zigong, 643000, China

DOI:

https://doi.org/10.54691/3j9txj18

Keywords:

Supplier Concentration; Future Earnings Prediction; Information Content; Ownership Nature; Agency Conflict.

Abstract

The impact of the supply chain relationship on operation efficiency, as well as some incremental info regarding how profitable it will be. Using sample data from 2015-2024 for a-share manufacturing companies in China and looking at whether or not supplier concentration predicts their earnings in the future. Findings: Supplier concentration has a positive and significant relationship with future earnings which does not change much after doing many checks for robustness. And we do heterogeneity analysis that shows the predictive power is concentrated within non-state-owned firms, those industries where competition is fierce and firm’s agency costs are less. These findings provide new empirical evidence concerning financial information content contained by supply chain structures, carrying important implications for investor decisions making process, supply chains’ management and policies.

Downloads

Download data is not yet available.

References

[1] Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. Free Press.

[2] Gao, Z. N., Wei, X., & Zhang, X. Y. (2023). Supplier concentration and stock price crash risk: Theoretical analysis and Chinese empirical evidence. Economics (Quarterly), 23(5), 1991–2008.

[3] Cheng, M. Y., Zheng, S. J., & Liu, J. (2019). Supplier/customer concentration and corporate earnings persistence: Insurance or risk. Audit and Economic Research, 34(4), 75–86.

[4] Tang, Y. J. (2009). Bargaining power of suppliers and distributors and company performance-Empirical evidence from listed Chinese manufacturing companies from 2005 to 2007. China Industrial Economy, (10), 67–76.

[5] Dyer, D. L., Wempe, W. F., & Zacharia, Z. G. (2010). Concentrated supply chain membership and financial performance: Chain and firm level perspectives. Journal of Operations Management, 28(1), 1–16.

[6] Fang, H. X., & Zhang, Y. (2016). Supplier/customer relationship transactions, earnings management, and auditor decision making. Accounting Research, (1), 79–86, 96.

[7] Williamson, O. E. (1985). The economic institutions of capitalism. Free Press.

[8] Wang, X. Y., Wang, P., & Zhang, J. P. (2014). Customer concentration and audit costs: Customer risk or supply chain integration. Audit Research, (6), 72–82.

[9] Chen, Z. L., & Wang, Y. (2014). Empirical study on the impact of supply chain integration on the financial performance of listed companies. Accounting Research, (2), 49–56, 95.

[10] Dyer, J. H., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660–679.

[11] Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A resource dependence perspective. Harper & Row.

[12] Chen, J., Wang, X. Y., & Peng, X. (2015). Environmental uncertainty, customer concentration, and cost of equity capital. Accounting Research, (11), 76–82, 97.

[13] Wang, D., Liu, Z. J., & Zhao, Z. P. (2016). Supply chain relationships and bank borrowing-An analysis based on supplier/customer concentration. Accounting Research, (10), 42–49, 96.

[14] Liu, X. X. (2000). The impact of ownership structure of Chinese industrial enterprises on efficiency differences-An empirical analysis of the 1995 National Industrial Enterprise Census Data. Economic Research Journal, (2), 17–25, 78–79.

[15] Lin, Y. F., & Li, Z. Y. (2004). Policy burden, moral hazard, and budget soft constraints. Economic Research Journal, (2), 17–27.

[16] Chen, Z. B., & Wang, S. Y. (2015). A study on the impact of product market competition on enterprise cash flow risk-Based on the dual consideration of industry competition degree and enterprise competitive position. China Industrial Economy, (3), 96–108.

[17] Wu, H. M., Yang, X. Q., & Wei, H. (2012). Product market competition and risk specific corporate stock characteristics-Based on empirical evidence from listed companies in China. Economic Research Journal, 47(6), 101–115.

[18] Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.

[19] Li, S. X. (2007). Property rights, agency cost, and agency efficiency. Economic Research Journal, (1), 102–113.

[20] Sloan, R. G. (1996). Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review, 71(3), 289–315.

[21] Patatoukas, P. N. (2012). Customer base concentration: Implications for firm performance and capital markets. The Accounting Review, 87(2), 363–392.

[22] Zhao, X. Y., & Bao, Q. (2015). Institutional environment, relational transactions, and cash holding decisions. Audit and Economic Research, 30(3), 21–29.

[23] Hayn, C. (1995). The information content of losses. Journal of Accounting and Economics, 20(2), 125–153.