Control Beyond Ownership: Open-Book Accounting in Unbalanced Supply Chain Networks

46 Pages Posted: 11 Oct 2021

See all articles by Woojin Kim

Woojin Kim

Seoul National University - Business School; European Corporate Governance Institute (ECGI)

Jongsub Lee

Seoul National University; University of Florida - Warrington College of Business Administration

Yunxiao Liu

SILC Business School, Shanghai University

Date Written: October 9, 2021

Abstract

Open-book accounting is a practice to disclose the full cost structure of suppliers to customers to achieve cost efficiency in supply chains. However, the dominant market power of customers could interfere with this goal in practice. Using unique data on the suppliers of large Korean business groups, we find that open-book accounting is associated with profit rate regulation by customers. Suppliers’ price growth is capped despite the increase in supplied goods. Profit rates of suppliers significantly co-move in times of low average profitability. Using an exogenous regulatory reform that outlawed coercive open-book accounting, we find the tendencies significantly reversed post-reform.

Keywords: Open-book accounting, supply chain networks, unbalanced bargaining power of customers over suppliers, large business groups, surplus sharing, firm boundary

JEL Classification: G10, G30, G32, G34

Suggested Citation

Kim, Woojin and Lee, Jongsub and Liu, Yunxiao, Control Beyond Ownership: Open-Book Accounting in Unbalanced Supply Chain Networks (October 9, 2021). Available at SSRN: https://ssrn.com/abstract=3939291 or http://dx.doi.org/10.2139/ssrn.3939291

Woojin Kim

Seoul National University - Business School ( email )

1 Gwanak-ro, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)
82-2-880-5831 (Phone)

HOME PAGE: http://cba.snu.ac.kr/en/faculty?mode=view&memberidx=60582&major=6

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Jongsub Lee (Contact Author)

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

University of Florida - Warrington College of Business Administration ( email )

Department of Finance Insurance & Real Estate
P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-273-4966 (Phone)
352-392-0301 (Fax)

Yunxiao Liu

SILC Business School, Shanghai University ( email )

China

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