The Impacts Of Supplier-Base Concentration And Supplier Environmental Violations On Chinese Listed Manufacturing Firms

Firms do not operate in a vacuum independently,their fates are closely related to their main suppliers,customers,competitors,and investors.From the perspective of the supply chain,the supplier decision,including how many suppliers to source from and which suppliers to corporate with,would have an impact on the firm.This dissertation takes Chinese listed manufacturing firms from 2012 to 2016 as a sample and conducts empirical studies.Firstly,the dissertation explores the impact of supplier-base concentration on inventory efficiencies.On one hand,firms sourcing from a concentrated supplier-base would enhance information sharing and corporation with suppliers,which would result in improved inventory efficiencies.On the other hand,firms sourcing from dispersing suppliers could promote supplier competition,which leads to a shorter lead time and improved inventory efficiencies.Through hand-collected supply chain data from annual reports,this study finds that the supplier concentration is positively related to inventory efficiencies,and smaller firms benefit more from improved supplier-base concentration.The analysis of the two-layer supply chain sample shows that it is because the improvement of supplier-base concentration that fosters information sharing and corporation therefore inventory efficiencies improved,rather than suppliers hold inventory for firms.Secondly,the dissertation empirically examines the association between supplier-base concentration and the bullwhip effect.The bullwhip effect indicates that the information of demand becomes distorted as it moves through the supply chain.This study uses the ratio of the volatility of demand to the volatility of production to proxy the bullwhip effect of the firm,and it finds that half of Chinese listed manufacturing firms bullwhip and firms exhibit substantial bullwhip heterogeneity.Regression results indicate that manufacturers with a more concentrated supplier base have less bullwhip effect.The findings hold after controlling for a wide range of firm characteristics,including demand seasonality,demand persistence,inventory holding days,firm size,and lead time.The first and second study explores the impacts of supplier-base concentration,the third study explores the impacts of suppliers,specifically,suppliers’ environmental violations.Firms’ unethical sourcing could reduce the cost.However,unethical sourcing may have a negative impact on the reputation,and put firms under environmental policy risk,for example,if government strengthens environmental policy,firms might need to change suppliers.Through merging supply chain data with environmental violation data from the Institute of Public and Environmental Affairs database,the study builds a unique sample of supplier environmental violations.Based on this sample,this study empirically finds that supplier environmental violations are negatively related to firm value.Furthermore,the more serious the supplier’s environmental violations,such as fines for violations,the more severe the penalties imposed by the capital market.The study emphasis that listed firms should not only pay attention to their own environmental performance but also need to supervise their suppliers’ environmental performance.For example,listed firms could choose a greener supplier,and also help suppliers to improve environmental performance.Since Chinese listed firms voluntarily disclose their top five suppliers,this study also empirically examines whether listed firms could avoid the penalty for supplier environmental violations by not disclosing their supplier information.The empirical results show that manufacturing firms who do not disclose supplier information do not have lower firm value than manufacturing firms who disclose supplier information.Therefore,listed firms could choose to not disclose supplier information,with the aim of avoiding the penalty for supplier environmental violations.This study suggests a policy to mandate or encourage listed firms to disclose more supply chain information.In this dissertation,there are some innovations in the research methods and research topics.First of all,the subject of operations and supply chain management traditionally adopts the theoretical modeling method;this dissertation uses observational data to build causality.Secondly,existing empirical studies examine the impact of customer-base concentration on the firm,such as the impact of customerbase concentration on inventory efficiencies,financial performance,and bank loans.This dissertation examines the impact of supplier-base concentration on inventory efficiencies and bullwhip effect,enriching the related research on operations and supply chain management.Lastly,this dissertation firstly analysis the supplier environmental performance,and empirically examine the impacts of supplier environmental violations on firm value.The analysis of suppliers of listed manufacturing firms,including supplierbase concentration and supplier environmental violations,has an important theoretical contribution to the related operations and supply chain management studies.The study also sheds light on the choice of suppliers for listed manufacturing firms in China.