Public and Private Information Channels along Supply Chains: Evidence from Contractual Private Forecasts

Global outsourcing and voluntary disclosure

“…Prior studies of corporate and financial intermediary networks suggest that parties that are central in the network are able to acquire information from various sources (e.g., Bajo et al., 2016; Houston et al., 2018; Larcker et al., 2013). Furthermore, when suppliers are central to the supply network, they may be in a better position to demand information from customers through private communication (Bushee et al., 2020; Crawford et al., 2020). Motivated by these arguments, we expect that the deterring global outsourcing effect on disclosure to be weaker when a US firm's suppliers relate to lower network centrality and thus demand more information from the firm.…”

“…We also investigate whether global outsourcing can affect the news valence of earnings forecasts. One alternative interpretation of the preceding findings is that, on average, managers may delay the release of unfavorable earnings forecasts to manage investors' and suppliers' expectations (Bushee et al., 2020; Kothari et al., 2009). In this case, the impeding effect of global outsourcing on disclosure might be attributed to managers' bad news hoarding activities.…”

“…We predict that the deterring global outsourcing effect on disclosure can be less salient for companies facing lower suppliers' information demand and view this effect as the supplier information demand channel . We perform subsample analyses based on suppliers' centrality within their supply networks, where a supplier's centrality metric indicates its ability to acquire information from the customer through private communication (Bushee et al., 2020; Crawford et al., 2020), or from other contracting parties in the network (e.g., Bajo et al., 2016; Houston et al., 2018; Larcker et al., 2013). The results are in line with our prediction that the negative global outsourcing impact on disclosure is weaker for firms when their suppliers have limited information access and resources.…”

The Effects of Terrorist Attacks on Supplier–Customer Relationships

“…The interaction effect between Supplier attack and Low supplier transparency is significantly positive (p < 0.05), suggesting that the effect of terrorist attacks near suppliers on supplier-customer relationship termination is more pronounced when the suppliers' information asymmetry is higher. 18 In addition to relying on suppliers' public disclosures, major customers can also communicate with suppliers through private channels (Bushee et al, 2020). Given that direct communication between suppliers and customers is not observable, we rely on the presence of common dedicated institutional investors between the supplier and customer to capture private communication between the two partners (Bushee and Noe, 2000;Cheung et al, 2020).…”

The Role of Corporate Social Responsibility (CSR) Information in Supply-Chain Contracting: Evidence from the Expansion of CSR Rating Coverage

“…2 The CSR information shock potentially reduces these processing costs, as the CSR ratings assist corporate customers in assessing individual CSR performance of each supplier. However, given the close and contractual relation between corporate customers and suppliers (Costello, 2013;Bushee et al, 2020;Crawford et al, 2020), corporate customers likely possess information about their suppliers' CSR. We thus argue that the CSR information shock primarily affects relative CSR information.…”