Strategic Disclosures of Litigation Loss Contingencies When Customer–Supplier Relationships Are at Risk
64 Pages Posted: 16 Aug 2013 Last revised: 1 Jul 2017
Date Written: May 1, 2017
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: Suggested Citation
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By Jin Wang