The Power of Economic Networks: Investor Recognition through Supply-Chain Relationships

52 Pages Posted: 4 Mar 2015 Last revised: 1 Jun 2017

See all articles by Ling Cen

Ling Cen

The Chinese University of Hong Kong

Erfan Danesh

Board of Governors of Federal Reserve System

Chayawat Ornthanalai

University of Toronto - Rotman School of Management

Xiaofei Zhao

Georgetown University - Robert Emmett McDonough School of Business

Date Written: June 1, 2016

Abstract

We show that firms gain visibility and shareholder base through supply-chain relationships with reputable trading partners. After relationship disclosure, supplier firms enjoy a boost in news coverage and are more likely to be held by the same institutional investor and covered by the same analyst following their customer firms. We show that managers strategically disclose relationships that benefit their firms' visibility, which leads to a reduction in advertising expenses and an increase in sales to other customers. Our findings highlight the role of product-market network as an important channel through which small and young firms gain investor recognition and improve their operating environment.

Keywords: Investor Recognition; Economic Network; Customer-Supplier Relationship

JEL Classification: L14; G11

Suggested Citation

Cen, Ling and Danesh, Erfan and Ornthanalai, Chayawat and Zhao, Xiaofei, The Power of Economic Networks: Investor Recognition through Supply-Chain Relationships (June 1, 2016). Rotman School of Management Working Paper No. 2572717. Available at SSRN: https://ssrn.com/abstract=2572717 or http://dx.doi.org/10.2139/ssrn.2572717

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/

Erfan Danesh

Board of Governors of Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
United States
1-202-280-4197 (Phone)

Chayawat Ornthanalai (Contact Author)

University of Toronto - Rotman School of Management ( email )

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

Xiaofei Zhao

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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