Does Supplier-base Concentration Influence Corporate Investment Efficiency?

Authors

  • Binfa Wang
  • Rui Ge

DOI:

https://doi.org/10.56028/aemr.4.1.183.2023

Keywords:

Supplier-base Concentration; Investment Efficiency; Under-investments; Over-investments.

Abstract

Although suppliers are important stakeholders of firms and intensively interact with the firms, there is limited research on whether and how suppliers influence their customers’ investments. To fill the void in the literature, we examine the relation between supplier-base concentration and corporate investment efficiency. Analyzing a comprehensive sample of Chinese listed firms, we find that when a firm’s supplier-base is more concentrated, its investment efficiency is generally lower. The results hold when we control for various factors that can influence corporate investment efficiency. Furthermore, we show that firms under-invest more when their supplier-base is more concentrated. However, we find no evidence that supplier-base concentration is significantly associated with firms’ over-investments. Overall, our findings suggest that supplier-base concentration impairs firms’ investment efficiency, which manifests in under-investments.

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Published

2023-03-16