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Supply chain risk disclosure and seasoned equity offering discount

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  • Li, Yanqiong
  • Wang, Xiongyuan
  • He, Jie
  • Chan, Kam C.

Abstract

We examine the impact of forward-looking supply chain risk disclosure (FSCRD) on information asymmetry and seasoned equity offering (SEO) discounts. Using textual analysis of the future risk subsections of outlook sections in annual reports from a sample of Chinese SEOs, we find robust evidence that a high FSCRD lowers the information asymmetry of the SEO firm, leading to a lower SEO discount. Our additional analysis shows that when an SEO firm (1) has a high financial constraint, (2) has a significant institutional investor shareholding, or (3) has a large analyst following, the impact of FSCRD on the SEO discount is more pronounced, corroborating the findings that FSCRD lowers information asymmetry and the SEO discount. Additional analysis suggests that the effect of FSCRD on information asymmetry and the SEO discount can be attributed to investors' lack of supply chain risk information and investors' lack of ability to process such information. Our findings imply that managers should consider disclosing potential supply chain risks in their firms' annual reports to leave less money on the table in SEOs.

Suggested Citation

  • Li, Yanqiong & Wang, Xiongyuan & He, Jie & Chan, Kam C., 2023. "Supply chain risk disclosure and seasoned equity offering discount," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:pacfin:v:82:y:2023:i:c:s0927538x23002597
    DOI: 10.1016/j.pacfin.2023.102188
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    More about this item

    Keywords

    Supply chain risk; Disclosure; Seasoned equity offering discount; Textual analysis; Forward-looking;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • G00 - Financial Economics - - General - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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