A firm is a nexus of different contracts. Prior studies investigate firms' contracts with different stakeholders (compensation contracts, employment contracts, loan contracts, and so on). While purchase contracts with suppliers are an essential factor in firms' operation process, there is little literature investigating firms' contracts with suppliers in accounting area due to data limitations. With the hand-collected data of firms' total purchase contracts with suppliers disclosed as purchase obligations (PO) in 10-K filings, my thesis examines two research questions related to purchase obligations to deepen the understanding of firms' contracts with suppliers: the determinants of PO in terms of internal information quality and bond market perception about PO.

The first chapter examines the effect of internal information quality (IIQ) on corporate purchase obligations engagements. Consistent with high IIQ enhancing managers' forecasting quality and thus mitigating the problem of underutilization of long-term agreements, I find that firms with higher IIQ engage in purchase obligations at a greater scale. This association is stronger for firms with more severe forecasting challenges as proxied by greater difficulty in information acquisition or by higher operational uncertainty. Further, consistent with higher IIQ empowering better supply chain management, I find that the positive effects of purchase obligations on future performance, reflected by inventory turnover, operating profitability, cost of goods sold volatility, and stock returns, are concentrated in high IIQ firm years. Overall, this chapter reveals IIQ as an important determinant of the scale of engagements in purchase obligations, a fundamental element of today's corporate procurement process.

The second chapter examines the creditors' perception of purchase obligations from the bond market. I find a negative relation between purchase obligations and bond yield, which provides additional insights to SEC's intention of purchase obligations disclosure. The negative relation between purchase obligations and bond yield is mainly driven by the hedging attribute of purchase obligations. It is more pronounced when firms face higher default risk or have restrictions in the availability of other financial derivatives. I further find evidence that purchase obligations also contain the manager's private information about future sales or performance. Overall, this chapter provides new insights against SEC's intention about purchase obligation disclosure.