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

49 Pages Posted: 4 Mar 2015 Last revised: 1 Aug 2019

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 disclosing supply-chain relationships with large and well-known trading partners in their SEC filings. Using a novel research design that focuses on the investor recognition effect of disclosures, we find a significant improvement in supplier firms’ investor recognition after they voluntarily disclose relationships with principal customers in SEC filings even though the relationships have already been mentioned in other public sources. Importantly, we find that this improvement in investor recognition leads to a significant increase in future operating cash flows. Our findings highlight the role of the product-market 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

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 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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
441
Abstract Views
2,533
rank
72,433
PlumX Metrics