Supply Chain Risk: Changes in Supplier Composition and Vertical Integration

81 Pages Posted: 17 Apr 2023 Last revised: 12 May 2023

See all articles by Nuri Ersahin

Nuri Ersahin

Southern Methodist University (SMU) - Finance Department

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Ruidi Huang

Southern Methodist University (SMU) - Finance Department

Multiple version iconThere are 3 versions of this paper

Date Written: April 2023

Abstract

Using textual analysis of earnings conference calls, we quantify firms’ supply chain risk and its sources. Our proxy for supply chain risk exhibits large cross-sectional and time-series variation that aligns with reasonable priors and is unprecedently high during the Covid-19 pandemic. In addition, a firm exhibits high supply chain risk when its suppliers also do so. We find that firms that experience an increase in supply chain risk establish relationships with closer and domestic suppliers and with suppliers that are industry leaders, but also continue to work with suppliers in other continents. In addition, firms that do not face financial constraints become more likely to engage in vertical mergers and acquisitions.

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Suggested Citation

Ersahin, Nuri and Giannetti, Mariassunta and Huang, Ruidi, Supply Chain Risk: Changes in Supplier Composition and Vertical Integration (April 2023). NBER Working Paper No. w31134, Available at SSRN: https://ssrn.com/abstract=4420549

Nuri Ersahin (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States

Mariassunta Giannetti

Stockholm School of Economics ( email )

P.O. Box 6501
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SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
+46 8 312 327 (Fax)

HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

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

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Ruidi Huang

Southern Methodist University (SMU) - Finance Department ( email )

United States

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