TY - JOUR
T1 - Supplier-Base Concentration and Cost Structure
AU - Chen, Clara Xiaoling
AU - Di, Lulu
AU - Jiang, Wei
AU - Li, Wei
N1 - Publisher Copyright:
© 2023, American Accounting Association. All rights reserved.
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 -