Supply Chain Risk: Changes in Supplier Composition and Vertical Integration

Supply Chain Risk: Changes in Supplier Composition and Vertical Integration

Nuri Ersahin, Mariassunta Giannetti, Ruidi Huang

Series number :

Serial Number: 
848/2022

Date posted :

September 27 2022

Last revised :

September 27 2022
SSRN Share

Keywords

  • supply chains • 
  • Textual Analysis • 
  • topic modeling • 
  • vertical integration • 
  • competition • 
  • M&As

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.

Controlling for the first moment of supply chain shocks, we find that firms that experience an increase in supply chain risk increase investment and establish relationships with closer and domestic suppliers and with suppliers that are industry leaders. In addition, firms that do not face financial constraints become more likely to engage in vertical mergers and acquisitions.

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Authors

Real name:
Nuri Ersahin
Real name:
Ruidi Huang