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

48 Pages Posted: 4 Mar 2015 Last revised: 31 Mar 2021

See all articles by Ling Cen

Ling Cen

The Chinese University of Hong Kong

Erfan Danesh

Board of Governors of the 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 increase their shareholder base through their supply chain relationships with large and well-known trading partners. After relationship disclosure, 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 highlight the supply-chain network as an important channel through which small and young firms gain investor recognition and improve operating environment.

Keywords: Customer-Supplier Relationship; Investor Recognition; Disclosure

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 Relationship Disclosures (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:///sites.google.com/site/cenling/

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 - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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