Effects Of Customer Financial Distress On Supplier Financial Distress

In recent years,the international is keen to study supplier-customer relations which has become a hot topic in corporate management.It can be concluded from the CSRC's continuous improvement of disclosure system that the supplier-customer relationship plays an important role in the market economy,and the enterprises have also begun to pay attention to the role of non-financial stakeholders,which also brings convenience to researchers.In conclusion,we must pay attention to the influence of supplier-customer relationship on business operation.But our country's economical environment is complex and changeable and it have very big uncertainty.This will cause the enterprise to go bankrupt or fall into the financial predicament.Market transaction parties begin to pay attention to the enterprise's operating financial condition.Therefore,in order to avoid financial distress or bankruptcy,the company will predict the financial status of the transaction party to avoid adverse consequences,and researchers have also begun to establish financial distress prediction models.At present,scholars have studied the financial impact of customer-supplier relationships on suppliers.The available evidence shows that in the capital market,the financial status of major customers will affect the performance of suppliers.Because most of the suppliers' revenue comes from major customers.For example,Cohen et al.(2008)believe that the supplier's stock return is positively correlated with the customer's stock return.Hertzel et al.(2008)find that the bankruptcy of customers has a negative impact on suppliers and their suppliers' industry competitors.Jarrow et al.(2001)and Gencay et al.(2015)found that the risk of the counterparty plays an important role in determining the price of public bonds.However,previous research only focused on the price effect of customer-supplier relationships on suppliers,such as stock returns and credit spreads,rather than focusing on the risk impact of customer-supplier relationships on suppliers.When major customers are in financial difficulties,major customers(like large suppliers of suppliers)influence the default risk of their suppliers.So far,we have not had a comprehensive study on whether or how risk is transmitted through the supply chain.This article starts from transaction cost theory,information asymmetry theory and signal transmission theory,which takes all A-share listed companies from 2007 to 2015 as research samples.And it builds relevant models based on previous research.It uses descriptive statistical analysis,correlation coefficient analysis,multivariate regression analysis and other methods to study the impact of supplier-client relationships on corporate financial distress.The empirical results show that: First of all,the financial distress will pass from the customer to the supplier company,that is,the customer financial distress in the year is significantly positively correlated with the financial distress of the supplier in the next year;second,the higher the degree of customer concentration,the stronger the positive correlation between customer financial distress and supplier financial distress;Furthermore,compared with non-state-owned enterprises,the positive correlation between customer financial distress and state-owned suppliers' financial distress is weaker,and in state-owned enterprises,the higher the proportion of state-owned shares,the weaker the positive correlation between the two.Finally,according to the conclusions of this paper,relevant suggestions are put forward.All in all,customer financial distress has a positive impact on the financial distress of suppliers,and it should pay more attention to large customers in the course of business operations and investor investment.This article is an empirical study of the impact of customer financial distress on the financial distress of suppliers.It not only enriched the relevant literature of non-financial stakeholders(suppliers and customers)in China,but also enriched relevant literature on corporate financial distress behavior.Further requirements have been put forward for supplier companies to continuously improve their operating mechanisms,and corresponding suggestions have been made for government departments.This article also has some innovations.On the one hand,it studies the customer's financial distress has contagious effects on suppliers.From the perspective of the topic selection,it is a novel research topic.On the other hand,the China Securities Regulatory Commission is committed to guiding listed companies to disclose various detailed information of large customers.This article also finds that customer information can provide investors with effective additional information,and it contributes to improving the system of customer information disclosure.