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Customers' tone in MD&A disclosure and suppliers' inventory efficiency: Evidence from China

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  • Yingying Xin
  • Xiao Zeng
  • Zhengying Luo

Abstract

This article examines whether and how customers' tone in MD&A disclosure affects suppliers' inventory efficiency. Using an unbalanced panel dataset compiled from multiple archival sources of Chinese‐listed companies, we find that the more positive tone in MD&A disclosure of customers is associated with the higher efficient suppliers' inventory and the results still hold after a battery of robust tests. The customers' tone in MD&A disclosure affects supplier firms' inventory efficiency by reducing the bullwhip effect. In addition, we find that customers' tone in MD&A disclosure has a more pronounced effect on improving suppliers' inventory efficiency when the customers have more analyst coverage and when the suppliers have less bargaining power.

Suggested Citation

  • Yingying Xin & Xiao Zeng & Zhengying Luo, 2022. "Customers' tone in MD&A disclosure and suppliers' inventory efficiency: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3833-3853, December.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:8:p:3833-3853
    DOI: 10.1002/mde.3632
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