Customers’ Risk Factor Disclosures and Suppliers’ Investment Efficiency

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)773–804
Journal / PublicationContemporary Accounting Research
Volume36
Issue number2
Online published1 Aug 2018
Publication statusPublished - 2019

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.

Research Area(s)

  • investment efficiency, risk factor disclosure, supply chain

Bibliographic Note

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