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Supply chain risk and capital structure decisions

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  • Nguyen, Quang Minh Nhi
  • Do, Trung K.

Abstract

This study employs textual analysis of earnings conference calls to explore how firms adjust their capital structures in response to increased supply chain risk. We find a negative and statistically significant relationship between supply chain risk and financial leverage, with the effect primarily explained through the cash flow volatility and the cost of debt channels. Furthermore, the negative impact of supply chain risk on leverage is more pronounced for firms with lower revenue diversification, less vertical integration, and fewer financial constraints. Overall, our findings support the notion that firms facing increased threats from supply chain disruptions are motivated to adopt a more conservative capital structure by reducing their financial leverage.

Suggested Citation

  • Nguyen, Quang Minh Nhi & Do, Trung K., 2025. "Supply chain risk and capital structure decisions," Economic Modelling, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:ecmode:v:153:y:2025:i:c:s026499932500344x
    DOI: 10.1016/j.econmod.2025.107349
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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F15 - International Economics - - Trade - - - Economic Integration

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