Vertical Firm Boundaries: Supplier-Customer Contracts and Vertical Integration

Williams, Ryan

doi:10.2139/ssrn.1786748

Cited by 9 publications

(8 citation statements)

References 60 publications

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“…For customer-supplier relationships that experience a turnover event, the median number of years in both the pre and post period is 4. Extending our analysis beyond the year of a turnover allows time for purchase obligations to expire (Williams (2012)) and new CEOs to change strategies, divest assets, switch suppliers, and/or renegotiate agreements.…”

Section: B Identifying Ceo Turnovers and Creating The Final Samplementioning

confidence: 99%

CEO Turnovers and Disruptions in Customer–Supplier Relationships

Intintoli¹,

Serfling²,

Shaikh³

2017

J. Financ. Quant. Anal.

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Events that disrupt customer–supplier relationships pose a source of risk for suppliers that depend on a customer for a large portion of their revenues. We identify the replacement of a customer’s chief executive officer (CEO) as a disruptive event that results in suppliers losing substantial sales. These losses are greater when an incumbent customer CEO is more likely to be entrenched and stem largely from the successor divesting assets. Finally, we document that losses in sales following a customer CEO turnover lead to declines in a supplier’s financial performance and that suppliers experience negative abnormal stock returns to announcements of customer CEO departures.

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Section: B Identifying Ceo Turnovers and Creating The Final Samplementioning

confidence: 99%

CEO Turnovers and Disruptions in Customer–Supplier Relationships

Intintoli¹,

Serfling²,

Shaikh³

2017

J. Financ. Quant. Anal.

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“…5 4 The prior literature typically relies only on firm-or industry-specific proxies to capture RSIs (e.g. Nunn, 2007;Williams, 2011;Houston and Johnson, 2000). In contrast, the contract-specific measures I use are measured for each buyer-supplier transaction, which increases construct validity since the analysis is at the contract/transaction level.…”

Section: Relationship Specific Investmentsmentioning

confidence: 99%

“…following Nunn (2007) and Williams (2011), I rely on Rauch's (1999) index for supplier output heterogeneity and calculate Differentiated as the percentage of total supplier-industry products that are neither traded on an organized exchange nor reference priced. As both RD Intensity and Differentiated increase, assets become more specific.…”

Section: Relationship Specific Investmentsmentioning

confidence: 99%

Mitigating incentive conflicts in inter-firm relationships: Evidence from long-term supply contracts

Costello

2013

Journal of Accounting and Economics

190

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Using a sample of long-term supply contracts collected from SEC filings, I show that holdup concerns and information asymmetry are important determinants of contract design. Asymmetric information between buyers and suppliers leads to shorter term contracts. However, when longer duration contracts facilitate the exchange of relationship specific assets, the parties substitute short-term contracts with financial covenants in order to reduce moral hazard. Covenant restrictions are more prevalent when direct monitoring is costly and the products exchanged are highly specific. Finally, I find that buyers and suppliers are less likely to rely on financial covenants when financial statement reliability is low.

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“…The description of his data can be found at http://faculty.haas.berkeley.edu/klee/Kwang Lee Purchase Obligations Data.htm. Also, a contemporaneous paper byWilliams (2012) uses similar data to explore supplier-customer relationship.6 The SEC defined a small business issuer as a company that had less than $25 million in revenues in its previous fiscal year, and whose outstanding publicly-held stock is worth no more than $25 million. In 2008, the SEC adopted a new terminology of 'smaller reporting companies' and amendments to its disclosure and reporting requirements to expand the number of companies that qualify for smaller reporting companies.…”

mentioning

confidence: 99%

Outside Purchase Contracts, Human Capital and Firm Capital Structure

Moon¹,

Phillips

2014

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Finance conference and USC for helpful comments. All errors are the authors alone. The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed herein are those of the authors and do not necessarily reflect the views of the Commission, the author's colleagues on the staff of the commission, or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Vertical Firm Boundaries: Supplier-Customer Contracts and Vertical Integration

Cited by 9 publications

References 60 publications

CEO Turnovers and Disruptions in Customer–Supplier Relationships

CEO Turnovers and Disruptions in Customer–Supplier Relationships

Mitigating incentive conflicts in inter-firm relationships: Evidence from long-term supply contracts

Outside Purchase Contracts, Human Capital and Firm Capital Structure

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