 Does a firm’s supplier concentration affect its cash holding?Xindong Zhang, Meifeng Zou, Weimin Liu and Yuefei Zhang Economic Modelling, 2020, vol. 90, issue C, 527-535 Abstract: High supplier concentration (SC) of a firm can weaken the firm’s bargaining power, which reduces its profitability and internal funds. Also, high SC likely increases the firm’s exposure to supply shocks, which results in high costs of external financing. Consequently, high-SC firms will incline to hold more cash due to the precautionary concern. However, there is little research into the effect of SC on cash holdings. This paper investigates how SC affects cash holdings with Chinese firms over 2009–2016. We find that a firm’s cash holding increases with its SC. Further investigations show that this positive relation stems from the unfavorable impact of SC on trade credit and equity financing. Our results are robust to different tests including the instrumental variable approach and the propensity score matching. Our findings are new to the literature and help to explain the cash holding puzzle. Our study also indicates that choosing supplier concentration adequately is important in maintaining a firm’s financial health. Keywords: Supplier concentration; Corporate cash holdings; Financial constraints (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:90:y:2020:i:c:p:527-535 DOI: 10.1016/j.econmod.2020.01.025 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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