Supply chain concentration and cost of capital

James E. Upson and Chao Wei

Accounting and Finance, 2024, vol. 64, issue 1, 607-634

Abstract: This study examines the impact of supply chain concentration on a firm's financing costs. We show purchasing firms with multiple supplier relationships are subject to higher information asymmetry and cost of equity. This effect is more pronounced when the supplier's financial performance deteriorates. We also find that lower supply chain concentration increases a firm's cost of debt. We believe that the purchaser's supply chain represents a source of material private information and that investors require a higher rate of return as compensation for increased information asymmetry. Our results are robust to combining the suppliers producing similar output and endogeneity issues.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.1111/acfi.13156

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:bla:acctfi:v:64:y:2024:i:1:p:607-634

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is currently edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().