TY - JOUR
T1 - Supplier-Base Concentration and Cost Structure
AU - Chen, Clara Xiaoling
AU - Di, Lulu
AU - Jiang, Wei
AU - Li, Wei
N1 - We thank Mary Ellen Carter (editor), Michal Mat≤ejka (senior editor), and two anonymous reviewers for their helpful suggestions and guidance. We also thank Curtis Hall (discussant), Ted (Seung Kyo) Ahn, Martin Artz, In Gyun Baek, Camelia Bejan, Dmitri Byzalov, Willie Choi, Joseph Comprix, Russell (Jong Won) Han, Martin Holzhacker, Matthias Mahlendorf, Craig Nichols, Sinja Sussek, Laurence Van Lent, workshop participants at Frankfurt School of Finance and Economics, Syracuse University, University of Washington, Bothell, University of Wisconsin–Madison, and Wake Forest University, and conference participants at the 2018 Management Accounting Section Midyear Meeting, the 2018 China Journal of Accounting Research Workshop, the 2018 International Capital Market Symposium at Jinan University, and the 2017 Chinese Management Accounting Professor Annual Conference for their helpful comments. Clara Xiaoling Chen is grateful for generous financial support from the Lillian and Morrie Moss Professorship. Wei Jiang is thankful for the support of the National Natural Science Foundation of China (72072071). Lulu Di is thankful for the support of the National Natural Science Foundation of China (72102195). All authors contributed equally to this work.
PY - 2023/6/1
Y1 - 2023/6/1
N2 - In the past three years, companies across the globe have witnessed significant supply chain disruptions due to the COVID-19 pandemic, which highlights the importance of managing supply risk. Supply risk has increased in the last three decades due to an increasing prevalence of concentrated supplier bases. We predict that firms with high supplier-base concentration will choose a more elastic cost structure in response to the increased supply risk. Using a unique dataset of 4,530 firm-year observations hand-collected from supplier information disclosed by Chinese-listed firms, we document a positive association between supplier-base concentration and cost elasticity. Furthermore, results from five cross-sectional tests are consistent with supply risk driving the association between supplier-base concentration and cost elasticity. Our study provides important practical implications to managers. To the extent that supplier-base concentration poses a supply risk, our study suggests that managers can respond by making the cost structure more flexible.
AB - In the past three years, companies across the globe have witnessed significant supply chain disruptions due to the COVID-19 pandemic, which highlights the importance of managing supply risk. Supply risk has increased in the last three decades due to an increasing prevalence of concentrated supplier bases. We predict that firms with high supplier-base concentration will choose a more elastic cost structure in response to the increased supply risk. Using a unique dataset of 4,530 firm-year observations hand-collected from supplier information disclosed by Chinese-listed firms, we document a positive association between supplier-base concentration and cost elasticity. Furthermore, results from five cross-sectional tests are consistent with supply risk driving the association between supplier-base concentration and cost elasticity. Our study provides important practical implications to managers. To the extent that supplier-base concentration poses a supply risk, our study suggests that managers can respond by making the cost structure more flexible.
KW - cost elasticity
KW - cost structure
KW - interfirm relationship
KW - supplier-base concentration
KW - supply risk
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U2 - 10.2308/JMAR-2022-009
DO - 10.2308/JMAR-2022-009
M3 - Article
AN - SCOPUS:85173767599
SN - 1049-2127
VL - 35
SP - 69
EP - 96
JO - Journal of Management Accounting Research
JF - Journal of Management Accounting Research
IS - 2
ER -