Public and Private Information Channels along Supply Chains: Evidence from Contractual Private Forecasts

56 Pages Posted: 11 Jan 2021 Last revised: 18 Apr 2024

See all articles by Brian J. Bushee

Brian J. Bushee

University of Pennsylvania - The Wharton School

Jessica Kim-Gina

University of California, Los Angeles (UCLA) - Accounting Area

Edith Leung

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: March 2024

Abstract

Firms along the supply chain rely on public disclosures and private information exchanges to develop forecasts about future performance. We examine how a firm’s public and private channels of information sharing with its supplier affect information spillovers along supply chains. Using a novel, hand-collected dataset, we investigate whether a customer’s commitment to provide private forecasts is informative and mitigates the spillover of biases in customers’ public management forecasts to suppliers’ public forecasts. We find that bias spillovers are significantly reduced when customers share private forecasts, and that private forecasts are more important for reducing bias spillover when the customer has strong incentives or ability to bias its public forecasts and when customer forecasts are more informative. Further, private forecast sharing enhances supply chain efficiency and lowers supplier investors’ reaction to customer earnings news, consistent with private forecasts making supplier disclosures more informative.

Keywords: Supply Chain, Inter-firm Information Transfer, Private Disclosures, Management Forecasts

JEL Classification: D82, L14, M41

Suggested Citation

Bushee, Brian J. and Kim-Gina, Jessica and Leung, Edith, Public and Private Information Channels along Supply Chains: Evidence from Contractual Private Forecasts (March 2024). Available at SSRN: https://ssrn.com/abstract=3736405 or http://dx.doi.org/10.2139/ssrn.3736405

Brian J. Bushee

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-4872 (Phone)
215-573-2054 (Fax)

Jessica Kim-Gina (Contact Author)

University of California, Los Angeles (UCLA) - Accounting Area ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://sites.google.com/view/kim-gina

Edith Leung

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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