The Role of Financial Information in Supply Chains: Evidence from Electronic Business Registers in Europe

Abstract

We explore the importance of firm financial information to the counterparty in supply chain relations. Exploiting the adoption of electronic depositories for financial reports (electronic business registers) in European countries as a shock to the access to private firms' financial information, we find that counterparty financial information asymmetrically affects supply chain parties: customerrelated financial information has a larger impact on suppliers' decisions than supplier-related financial information has on customers' decisions. We also find that the usefulness of customers' financial information to suppliers varies with the scope and reliability of that information. Finally, we find that the effect of the information shock varies with the stages of the supply chain relations: (i) a shock that occurs before the start of supply chain relations contributes to the stability of the relations and (ii) a shock that occurs after relations have started tends to destabilize relations. Overall, our results highlight nuances in the importance of financial information in the supply chain.

Keywords: supply chain relationships, financial information, electronic business registers, financial disclosure regulation