The Power of Economic Networks: Investor Recognition through Supply-Chain Relationships
52 Pages Posted: 4 Mar 2015 Last revised: 1 Jun 2017
Date Written: June 1, 2016
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: Suggested Citation