Does supplier concentration matter to investors during the COV1D-19 crisis: evidence from China?
Louis T W Cheng, Jack S C Poon, Shaolong Tang, Jacqueline Wenjie Wang
Author Information
Louis T W Cheng: School of Business, The Hang Seng University of Hong Kong, Hong Kong, China. ORCID
Jack S C Poon: School of Accounting and Finance of the Hong Kong Polytechnic University, Hong Kong, China.
Shaolong Tang: Division of Business and Management, Beijing Normal University-Hong Kong Baptist University, United International College, Zhuhai, China.
Jacqueline Wenjie Wang: Division of Business and Management, Beijing Normal University-Hong Kong Baptist University, United International College, Zhuhai, China.
The literature shows that investor attention to customer-supplier disclosure increases when suppliers' information arrival is anticipated. Due to the widespread of city lockdowns in China and the implementation of social distancing to control the COVID-19 pandemic, investor attention to potential disruption of the supply chain spikes, leading to a price devaluation for firms with high supplier concentration risk. We find that a higher degree of supplier concentration is related to more serious stock price declines over the short-term and medium-term windows right after the Wuhan lockdown. This result lends support to the argument that the concentration risk of suppliers is a significant consideration for China stock market investors, especially under the potential financial distress at the firm level induced by the COVID-19 crisis.
