Supplier Financing and Managerial Information Hoarding: Monitoring versus Concessions?

43 Pages Posted: 1 May 2020 Last revised: 21 Sep 2022

See all articles by Viet Anh Dang

Viet Anh Dang

Alliance Manchester Business School

Edward Lee

University of Manchester - Alliance Manchester Business School

Yangke Liu

Queen's Management School

Cheng (Colin) Zeng

Hong Kong Polytechnic University

Date Written: May 26, 2022

Abstract

This paper examines the relation between supplier financing and customer firms’ information hoarding behavior, proxied by future stock price crash risk. We find that supplier financing is negatively associated with stock price crash risk, consistent with suppliers effectively monitoring buyers through trade credit provision and therefore constraining their bad-news-hoarding behavior. This relationship holds in a battery of identification tests that address endogeneity, including a difference-in-differences analysis based on an amendment in the U.S. bankruptcy code. Further tests reveal that the role of supplier financing in mitigating stock price crash risk is more pronounced among customers with weaker market power, higher distress risk, and weaker alternative governance and monitoring mechanisms.

Keywords: Supplier financing; Crash risk; Supply chains; Monitoring; Managerial news hoarding

JEL Classification: G3, G12, G14

Suggested Citation

Dang, Viet Anh and Lee, Edward and Liu, Yangke and Zeng, Cheng, Supplier Financing and Managerial Information Hoarding: Monitoring versus Concessions? (May 26, 2022). Available at SSRN: https://ssrn.com/abstract=3570499 or http://dx.doi.org/10.2139/ssrn.3570499

Viet Anh Dang (Contact Author)

Alliance Manchester Business School ( email )

AMBS Crawford House
Booth Street West
Manchester, Greater Manchester M15 6PB
United Kingdom
+44(0)16127 50438 (Phone)

Edward Lee

University of Manchester - Alliance Manchester Business School ( email )

Booth St. West (Crawford House)
Manchester, M15 6PB
United Kingdom

Yangke Liu

Queen's Management School ( email )

Riddel Hall
185 Stranmillis Road
Belfast, BT9 5EE
United Kingdom

Cheng Zeng

Hong Kong Polytechnic University ( email )

11 Yuk Choi Rd
Hung Hom
Hong Kong

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
120
Abstract Views
859
Rank
419,528
PlumX Metrics