Strategic Disclosures of Litigation Loss Contingencies When Customer–Supplier Relationships Are at Risk

64 Pages Posted: 16 Aug 2013 Last revised: 1 Jul 2017

See all articles by Ling Cen

Ling Cen

The Chinese University of Hong Kong

Feng Chen

University of Toronto - Rotman School of Management

Yu Hou

Queen's University - Smith School of Business

Gordon D. Richardson

University of Toronto - Rotman School of Management

Date Written: May 1, 2017

Abstract

In the presence of litigation facing suppliers, the supply-chain relationship is at risk. Suppliers with principal customers (dependent suppliers) have a higher concentration of sales to customers, and they are more at risk relative to suppliers without principal customers (non-dependent suppliers). As a result, we predict and find that litigation disclosure patterns differ for the two supplier types: dependent suppliers are more likely to delay bad news and accelerate good news related to litigation outcomes, compared to non-dependent suppliers. Such strategic disclosure patterns in our end-game setting are opposite to those documented in the existing supply-chain literature for the repeated-game setting (for example, Hui, Klasa, and Yeung 2012).

Keywords: Customer-Supplier Relationships; Litigation Loss Contingency Disclosures; Proprietary Costs

JEL Classification: M41, M48, K22

Suggested Citation

Cen, Ling and Chen, Feng and Hou, Yu and Richardson, Gordon D., Strategic Disclosures of Litigation Loss Contingencies When Customer–Supplier Relationships Are at Risk (May 1, 2017). The Accounting Review, Forthcoming; Rotman School of Management Working Paper No. 2310382. Available at SSRN: https://ssrn.com/abstract=2310382 or http://dx.doi.org/10.2139/ssrn.2310382

Ling Cen

The Chinese University of Hong Kong ( email )

CYT Building
Sha Tin
Hong Kong, Hong Kong
Hong Kong

HOME PAGE: http://https://sites.google.com/site/cenling/

Feng Chen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Yu Hou

Queen's University - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Gordon D. Richardson (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-8601 (Phone)
416-971-3048 (Fax)

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