Spreading the Misery? Sources of Bankruptcy Spillover in the Supply Chain

Kolay, Madhuparna; Lemmon, Michael L.; Tashjian, Elizabeth

doi:10.1017/s0022109016000855

Cited by 133 publications

(53 citation statements)

References 57 publications

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“…These supply chain disruptions have been shown to result in negative share price valuations (Hendricks and Singhal 2005). Disruptions, such as the bankruptcy of a firm, are likely to lead to financial costs to its key customers and suppliers (Kolay et al 2016). The banking industry appears to recognize this danger and, as a result, offers firms with concentrated customer bases higher interest rates and a greater number of restrictive covenants in their corporate loans (Campello and Gao 2017).…”

Section: Concentrationmentioning

confidence: 99%

Customer and Supplier Portfolios: Can Credit Risks be Managed Through Supply Chain Relationships?

Schwieterman

Goldsby

Croxton

2018

J of Business Logistics

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While supply chain risk has been the subject of an ever‐increasing amount of research attention, the importance of credit risk has been less studied, at least by supply chain researchers. Yet, there may be risks inherent within a firm's portfolios of supply chain relationships that are manifested in the credit risk of a firm. Moreover, portfolio characteristics may serve as a signal to the external market regarding these risks. While customer and supplier portfolio characteristics may impact the firm's exposure to risks, the specific issue of how portfolio characteristics relate to credit risk has rarely been examined by supply chain scholars. This research bridges extant works in supply chain management and finance to relate supply chain characteristics to a critical reputational outcome, namely credit ratings. In this research, we utilize a sample of firms that recently underwent an initial public offering to empirically examine the theoretical predictions of Resource Dependence Theory regarding the relationships between different supply chain portfolio characteristics and credit risk.

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Section: Concentrationmentioning

confidence: 99%

Customer and Supplier Portfolios: Can Credit Risks be Managed Through Supply Chain Relationships?

Schwieterman

Goldsby

Croxton

2018

J of Business Logistics

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“…Prior research documented the role of supply chains in bankruptcy waves (Hertzel et al 2008, Houston et al 2016, Kolay et al 2016. Researchers looked at supply chain network characteristics, such as network centrality (Wu andBirge 2014, Yang andZhang 2016), customer concentration (Cen et al 2017, Campello andGao 2017), and network distance from the event firm (Wu 2015).…”

Section: Supply Chains and Asset Pricingmentioning

confidence: 99%

Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM): Recent Contributions and Future Directions

Babich

Kouvelis

2018

M&SOM

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Abstract. Interface of finance, operations, and risk management (iFORM) is a relatively new research area dealing with timely, complex, and boundary-spanning issues in a variety of settings from start-ups to global enterprises. iFORM research addresses ways to better integrate physical, financial, and informational flows by combining the operational choices of the firm with its financial decisions, and merging information flows between the firm and its customers and suppliers with informational flows between the firm and its investors. We report on the main research themes of the recent iFORM research, based on, and going beyond, papers that appeared in the Manufacturing and Service Operations Management iFORM special issue. We highlight the main emerging contributions in the area. Among the most frequently addressed issues in current research include the following: supply chain finance, such as trade credit and buyer-intermediated finance and their effects on supply chain performance; agency problems, such as risk shifting and managerial short-termism and their influence on operational decisions; contracting between the firm and its investors and how it alters contracting with supply chain partners; and supply risk management in the form of dealing with commodity price fluctuations and supplier performance issues. We suggest four promising directions of future iFORM research: supply chain finance, integrated risk management, start-up and entrepreneurial financing, and asset pricing with supply chains.

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“…SFAS No. 131 (Codification 280-10) requires firms to disclose major customers because they signal high uncertainty about the supplier's future cash flow, and because firm-specific shocks along a supply chain can impact the performance of nearby firms in the chain (Hertzel, Li, Officer, and Rodgers 2008;Kolay et al 2016). Prior research studies how equity and credit markets evaluate firms' customer concentration.…”

Section: Prior Literaturementioning

confidence: 99%

“…Prior studies provide mixed views of the effects of customer concentration. On one hand, customer concentration signals heightened business risk and has been shown to increase the cost of equity and cost of debt (Kolay, Lemmon, and Tashjian 2016;Dhaliwal, Judd, Serfling, and Shaikh 2016;Campello and Gao 2017). On the other hand, some studies find that concentrated firms have higher rates of return due to greater operating efficiencies (Kalwani and Narayandas 1995;Patatoukas 2012).…”

Section: Introductionmentioning

confidence: 99%

Customer Concentration of Targets in Mergers and Acquisitions

2019

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We study how customer base concentration at a target firm impacts the occurrence and structure of M&A deals. We hypothesize that customer concentration increases information asymmetry and adverse selection between bidders and targets, such that (1) firms with greater customer concentration are less likely to receive a bid and (2) bidders for targets with greater customer concentration share the risk by using more stock payment in their offer. Using data on customer concentration and M&A deals from 1985 to 2016, we find consistent evidence supporting our predictions. Our findings extend the literature by systematically documenting an important factor in M&A decisions and by quantifying the economic consequences of customer concentration.

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Spreading the Misery? Sources of Bankruptcy Spillover in the Supply Chain

Cited by 133 publications

References 57 publications

Customer and Supplier Portfolios: Can Credit Risks be Managed Through Supply Chain Relationships?

Customer and Supplier Portfolios: Can Credit Risks be Managed Through Supply Chain Relationships?

Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM): Recent Contributions and Future Directions

Customer Concentration of Targets in Mergers and Acquisitions

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