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Supply Chain Risk: Changes in Supplier Composition and Vertical Integration

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  • Ersahin, Nuri
  • Giannetti, Mariassunta
  • Huang, Ruidi

Abstract

Using textual analysis of earnings conference calls, we quantify firm level risk arising from the reliability of the supply chain from 2002 to 2020. Our proxy for perceived supply chain risk exhibits cross-sectional and time-series variation that aligns with reasonable priors and is unprecedently high following the Covid-19 pandemic. We find that firms that face higher supply chain risk establish relationships with closer and domestic suppliers and with suppliers that are industry leaders. In addition, firms that do not face financial constraints are more likely to engage in vertical mergers and acquisitions when they face supply chain risk.

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  • Ersahin, Nuri & Giannetti, Mariassunta & Huang, Ruidi, 2022. "Supply Chain Risk: Changes in Supplier Composition and Vertical Integration," CEPR Discussion Papers 17208, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17208
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    Cited by:

    1. Ersahin, Nuri & Giannetti, Mariassunta & Huang, Ruidi, 2024. "Trade credit and the stability of supply chains," Journal of Financial Economics, Elsevier, vol. 155(C).
    2. Fahr, Stephan & Senner, Richard & Vismara, Andrea, 2024. "The globalization of climate change: amplification of climate-related physical risks through input-output linkages," Working Paper Series 2942, European Central Bank.
    3. Ignacia Cuevas & Thomas Bourany & Gustavo González, 2024. "Supply Chain Uncertainty and Diversification," Working Papers Central Bank of Chile 1018, Central Bank of Chile.

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    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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