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

65 Pages Posted: 11 Jan 2021

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: November 24, 2020

Abstract

Firms along the supply chain rely on both public disclosures and private information exchanges to develop forecasts about future performance. In this paper, we examine how a firm’s public and private channels of information sharing with its trading partners affect information spillovers along supply chains. First, we document the general phenomenon of bias spillover in supply chains; i.e., a supplier’s management forecast bias is positively associated with its customer’s forecast bias. Second, using a novel, hand-collected dataset, we investigate whether a customer’s commitment to provide private forecasts mitigates the bias spillover by allowing the supplier to better detect strategic biases in the customer’s public forecasts due to capital market incentives. We find that bias spillover is significantly reduced when the customer commits to providing regular 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. Overall, our paper highlights the interplay of private and public communication between trade partners.

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 (November 24, 2020). 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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
364
Abstract Views
1,260
rank
121,360
PlumX Metrics