Corporate Environmental Risk and the Customer-Supplier Relationship

46 Pages Posted: 5 Dec 2014 Last revised: 28 Jun 2018

See all articles by Shantanu Banerjee

Shantanu Banerjee

Lancaster University - Management School

Xin (Simba) Chang

Nanyang Business School, Nanyang Technological University

Kangkang Fu

Hong Kong Baptist University

Tao Li

Central University of Finance and Economics (CUFE) - School of Economics

George Wong

The Hong Kong Polytechnic University

Date Written: October 1, 2014

Abstract

We provide empirical evidence on the adverse effects of supplier firms’ environmental risk exposures on their relationships with principal customers. We document that supplier firms with high environmental risk are less likely to have principal customers. Moreover, from the principal customers’ perspective, a higher level of environmental risk lowers a supplier firm’s probability of being selected relative to its industry peers by its potential customer. Conditional on an ongoing relationship with principal customers, supplier firms with high environmental risk have lower sales to principal customers and shorter relationship durations. These results are more pronounced when customers’ environmental risk is lower. Collectively, our findings suggest that improving the trading relationship with principal customers is an important channel through which firms can benefit economically from being environmentally responsible.

Keywords: corporate social responsibility, product market competition, environmental risk, customer-supplier relationship

JEL Classification: G32, L21

Suggested Citation

Banerjee, Shantanu and Chang, Xin and Fu, Kangkang and Li, Tao and Wong, George, Corporate Environmental Risk and the Customer-Supplier Relationship (October 1, 2014). Available at SSRN: https://ssrn.com/abstract=2533471 or http://dx.doi.org/10.2139/ssrn.2533471

Shantanu Banerjee (Contact Author)

Lancaster University - Management School ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

Xin Chang

Nanyang Business School, Nanyang Technological University ( email )

S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore

HOME PAGE: http://www.ntu.edu.sg/home/changxin

Kangkang Fu

Hong Kong Baptist University ( email )

34 Renfrew Road
Wing Lung Bank Building for Business
Hong Kong
Hong Kong

Tao Li

Central University of Finance and Economics (CUFE) - School of Economics ( email )

Beijing
China

George Wong

The Hong Kong Polytechnic University ( email )

School of Accounting and Finance
Hung Hom, Kowloon, 0
Hong Kong
852 3400 3459 (Phone)
852 2330 9845 (Fax)

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