The impact of major customers’ qualitative forward-looking information on suppliers’ future operating performance

This study investigates the impact of qualitative information in the forward-looking management earnings forecast reports (MEFRs) on the future operating performance of suppliers in the supply chain. We find the following: First, the qualitative information quality of customer MEFRs, as measured by textual unreadability or uncertainty, is significantly and negatively associated with suppliers’ future operational performance; Second, the positive association between qualitative information content, measured by textual tone change in customer MEFRs, and suppliers’ future performance depends on the qualitative information quality of such reports; Third, the influences of qualitative information quality and content of customer MEFRs are more pronounced for suppliers with a greater analyst following. Further analysis reveals that the quantitative and qualitative quality of customer MEFRs complement each other in improving suppliers’ future performance. In addition, the impact of qualitative information quality and content of customer MEFRs is stronger for more dependent suppliers and those with greater sales volatility. In summary, these findings indicate that the information contained in customer MEFRs is not only relevant to the future operating performance of suppliers but also that the qualitative characteristics of these reports influence its effectiveness.