Customers’ Risk Factor Disclosures and Suppliers’ Investment Efficiency

Tzu-Ting CHIU*, Jeong-Bon KIM, Zheng WANG

*Corresponding author for this work

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

85 Citations (Scopus)

Abstract

This study examines the effect of downstream firms’ (i.e., customers’) risk factor disclosures contained in annual reports on the investment efficiency of upstream firms (i.e., suppliers). We find that more informative disclosures of customers’ risk factors are associated with less under- or overinvestment by suppliers. In addition, this inverse association is stronger when the suppliers are at a bargaining disadvantage, when they operate in the durable goods industries, and when they are more concerned about the volatility of future demand. Overall, our results suggest that risk factor disclosures provided by firms in their annual reports contain useful information that could potentially help their suppliers achieve better investment efficiency.
Original languageEnglish
Pages (from-to)773–804
JournalContemporary Accounting Research
Volume36
Issue number2
Online published1 Aug 2018
DOIs
Publication statusPublished - 2019

Bibliographical note

Research Unit(s) information for this publication is provided by the author(s) concerned.

Research Keywords

  • investment efficiency
  • risk factor disclosure
  • supply chain

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