Supplier concentration and corporate acquisitions: a risk-mitigation perspective

Obaid Ur Rehman, Wen Li and Kai Wu

Accounting Research Journal, 2026, vol. 39, issue 2, 243-259

Abstract: PurposeThis paper aims to test whether supplier concentration (SC), dependence on a few upstream vendors, pushes firms to integrate backwards through M&A and whether such deals are pursued chiefly to curb supply-chain risk, not to chase short-term profits.Design/methodology/approachCombining hand-collected supplier disclosures with M&A records for all Chinese A-share firms from 2001 to 2024, the authors obtain 17,794 observations for 1925 acquirers with 6758 completed vertical integration deals. SC equals the purchase share of the three largest vendors; acquisitiveness is measured by the annual count and total value (log) of supplier-targeted deals. Fixed-effects regressions, event-study cumulative abnormal returns, long-run buy-and-hold abnormal returns (BHARs), post-deal changes in dependence and structural equation modeling mediation analyses (cash, relationship-specific R&D) constitute the empirical toolkit.FindingsA one-standard-deviation increase in SC raises the likelihood of a vertical acquisition by 11% and increases deal value by 44%. Announcement returns of 1.9–2.7% and BHARs up to 17% indicate sustained value creation. Three years after completion, the major supplier’s purchase share falls by 8% and ROA improves by roughly 9%. The effect is channeled through the acquirer’s cash-richness, while the acquirer’s more relationship-specific investment dampens the impact.Originality/valueThe study introduces SC as a first-order determinant of takeover activity, offering fresh support for transaction-cost and resource-dependence theories. It shows that arm’s-length vertical acquisitions effectively hedge against upstream shocks, informing managers’ boundary decisions and policymakers’ efforts to bolster supply-chain resilience.

Keywords: Supplier concentration; Vertical M&A; Risk mitigation; Supply-chain finance; Acquisition performance (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/arj/article/39/2/243/13403 ... rporate-acquisitions (text/html)
https://www.emerald.com/arj/article-pdf/39/2/243/11225094/arj-07-2025-0257en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-07-2025-0257

DOI: 10.1108/ARJ-07-2025-0257

Access Statistics for this article

Accounting Research Journal is currently edited by Yaowen Shan and DaiFei "Troy" Yao

More articles in Accounting Research Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().