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Does supplier concentration matter to investors during the COVID-19 crisis: evidence from China?

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  • Louis T. W. Cheng

    (The Hang Seng University of Hong Kong)

  • Jack S. C. Poon

    (School of Accounting and Finance of the Hong Kong Polytechnic University)

  • Shaolong Tang

    (Beijing Normal University-Hong Kong Baptist University, United International College)

  • Jacqueline Wenjie Wang

    (Beijing Normal University-Hong Kong Baptist University, United International College)

Abstract

The literature shows that investor attention to customer–supplier disclosure increases when suppliers’ information arrival is anticipated. Due to the widespread of city lockdowns in China and the implementation of social distancing to control the COVID-19 pandemic, investor attention to potential disruption of the supply chain spikes, leading to a price devaluation for firms with high supplier concentration risk. We find that a higher degree of supplier concentration is related to more serious stock price declines over the short-term and medium-term windows right after the Wuhan lockdown. This result lends support to the argument that the concentration risk of suppliers is a significant consideration for China stock market investors, especially under the potential financial distress at the firm level induced by the COVID-19 crisis.

Suggested Citation

  • Louis T. W. Cheng & Jack S. C. Poon & Shaolong Tang & Jacqueline Wenjie Wang, 2022. "Does supplier concentration matter to investors during the COVID-19 crisis: evidence from China?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-28, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-022-00391-0
    DOI: 10.1186/s40854-022-00391-0
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    References listed on IDEAS

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    Cited by:

    1. Chai Bin Feng & Muhammad Usman Khurram & Raheel Safdar & Sultan Sikandar Mirza & Amjad Iqbal, 2023. "Corporate strategic responses, supplier concentration and sustainable growth of chinese listed firms," Operations Management Research, Springer, vol. 16(3), pages 1413-1427, September.

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