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Supply Chain Risk: Changes in Supplier Composition and Vertical Integration

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  • Nuri Ersahin
  • Mariassunta Giannetti
  • Ruidi Huang

Abstract

Using textual analysis of earnings conference calls, we quantify firms’ supply chain risk and its sources. Our proxy for supply chain risk exhibits large cross-sectional and time-series variation that aligns with reasonable priors and is unprecedently high during the Covid-19 pandemic. In addition, a firm exhibits high supply chain risk when its suppliers also do so. We find that firms that experience an increase in supply chain risk establish relationships with closer and domestic suppliers and with suppliers that are industry leaders, but also continue to work with suppliers in other continents. In addition, firms that do not face financial constraints become more likely to engage in vertical mergers and acquisitions.

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  • Nuri Ersahin & Mariassunta Giannetti & Ruidi Huang, 2023. "Supply Chain Risk: Changes in Supplier Composition and Vertical Integration," NBER Working Papers 31134, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31134
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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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