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Stock Market Information and Innovative Investment in the Supply Chain
[Corporate equity ownership, strategic alliances, and product market relationships]

Author

Listed:
  • Lantian Liang
  • Ryan Williams
  • Steven Chong Xiao

Abstract

We investigate whether suppliers adjust innovative supply chain investment following stock market signals about customers’ economic prospects. We show that suppliers increase R&D and investment in customer-related patents after positive market reactions to customers’ new product announcements. A battery of falsification tests suggest that spurious factors are unlikely to explain our results. Market signals about customers appear more important when information asymmetry is greater, when suppliers face greater competitive threats, and when suppliers are financially unconstrained. Our evidence suggests that the stock market can be a viable source of information to mitigate supply chain frictions. (JEL G14, G30, L14)

Suggested Citation

  • Lantian Liang & Ryan Williams & Steven Chong Xiao, 2021. "Stock Market Information and Innovative Investment in the Supply Chain [Corporate equity ownership, strategic alliances, and product market relationships]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 10(4), pages 856-894.
    • Handle: RePEc:oup:rcorpf:v:10:y:2021:i:4:p:856-894.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfaa020
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    Citations

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    Cited by:

    1. Itay Goldstein, 2023. "Information in Financial Markets and Its Real Effects," Review of Finance, European Finance Association, vol. 27(1), pages 1-32.

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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