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Managing crash risks through supply chain transparency: evidence from China

Author

Listed:
  • Qiming Zhong

    (Zhongnan University of Economics and Law)

  • Qinghua Song

    (Zhongnan University of Economics and Law)

  • Chien-Chiang Lee

    (Nanchang University
    Nanchang University
    Lebanese American University)

Abstract

Using data on Chinese non-financial listed firms covering 2009 to 2022, we explore the effect of supply chain transparency on stock price crash risk. Two proxies for supply chain transparency are constructed using the number of supply chain partners’ names and the proportion of their transactions disclosed in annual reports. The results reveal that enhancing supply chain transparency can decrease crash risk, specifically by mitigating tax avoidance and earnings management. Moreover, the analysis suggests that this risk-reduction effect is more prominent in companies where managers are more incentivized to hide negative information and investors possess superior abilities to acquire information. Interestingly, supplier transparency is more influential in mitigating crash risk than customer transparency. These findings emphasize the significance of supply chain transparency in managing financial risk.

Suggested Citation

  • Qiming Zhong & Qinghua Song & Chien-Chiang Lee, 2024. "Managing crash risks through supply chain transparency: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-31, December.
    • Handle: RePEc:spr:fininn:v:10:y:2024:i:1:d:10.1186_s40854-024-00633-3
    DOI: 10.1186/s40854-024-00633-3
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    More about this item

    Keywords

    Supply chain transparency; Stock price crash risk; Corporate governance; Information transfer;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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