The impact of customers’ MD&A sentiment on the bullwhip effect: A dyadic buyer-supplier perspective

Forward-looking disclosure sentiment is a practical reference signaling in examining companies' expectations about market opportunities and prospects. Although obtaining more comprehensive information can alleviate the bullwhip effect (BWE) caused by supply–demand mismatches in supply chains, few studies consider the impact of this sentiment at the supply chain level. Management discussion and analysis (MD&A) sentiment, which reflects companies' expectations of future market conditions and understanding of demand prospects, sets the stage for addressing the gap. Adopting signaling theory, this study provides empirical evidence on the effects of signaling, represented by customers' MD&A sentiment, on BWE in supply chains. We matched 348 Chinese manufacturing listed companies with their top five customers from 2007 to 2022, forming an unbalanced panel dataset of 1269 supplier-customer pairs. Our results show that customers' MD&A sentiment has a U-shaped relationship with BWE, which indicates that customers' expectations of future prospective can influence suppliers' supply-demand matching. Furthermore, signaler characteristics represented by customer managerial myopia, signaling environment represented by customer transparency, receiver characteristics represented by supplier asymmetric cost management, moderate the U-shaped relationship. Our study provides a comprehensive perspective on the effects of customers' MD&A sentiment on BWE from a dyadic buyer–supplier perspective. Moreover, our study also extends the application of signaling theory by considering the effects of the signaler's, signaling environment's, and receiver's characteristics on signaling effectiveness.