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

42 Pages Posted: 4 Mar 2015 Last revised: 21 Feb 2025

See all articles by Erfan Danesh

Erfan Danesh

Board of Governors of the Federal Reserve System

Chayawat Ornthanalai

University of Toronto - Rotman School of Management

Xiaofei Zhao

Georgetown University - McDonough School of Business

Date Written: May 15, 2024

Abstract

We show that firms gain visibility and increase their shareholder base through their supply chain relationships with large and well-known trading partners. After the relationship is reported, supplier firms enjoy a boost in investor recognition, evidenced by more institutional investors holding the firms’ stocks, more intensive news coverage, and more EDGAR searches for the firms’ SEC filings. We show that managers strategically disclose relationships to improve their firms’ visibility. This reduces advertising expenses, increases sales, and consequently improves profitability. Our findings high-light the supply-chain network as an important channel through which small and young firms gain investor recognition and improve their operating environment.

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

JEL Classification: L14; G11

Suggested Citation

Danesh, Erfan and Ornthanalai, Chayawat and Zhao, Xiaofei, The Power of Economic Networks: Investor Recognition through Supply-Chain Relationships (May 15, 2024). 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

Erfan Danesh

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue 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 - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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