Customers’ capital market information quality and suppliers’ performance
Document Type
Journal article
Source Publication
Production and Operations Management
Publication Date
10-2014
Volume
23
Issue
10
First Page
1690
Last Page
1705
Publisher
Wiley-Blackwell Publishing, Inc.
Keywords
information sharing, earnings guidance and quality, analysts, credit rating, DuPont profitability ratios
Abstract
We empirically examine the association between downstream firms’, i.e., customers’ capital market information quality, and the operating performance of upstream firms, i.e., suppliers. Customers’ capital market information quality is measured by the customers’ provision of earnings forecasts, the customers’ reported earnings quality, and the customers’ coverage by financial analysts and credit rating agencies. We hypothesize and find a positive association between customers’ capital market information quality and suppliers’ operating performance measured by the DuPont profitability ratios. The association is stronger for suppliers with higher sales volatility, no order backlogs, customers who are less dependent on their input, and shorter business relation with customers. Collectively, the results suggest that the quality of information provided by the customers to the capital market has a spillover effect in the input market, i.e., helps the suppliers improve their performance.
DOI
10.1111/poms.12211
Print ISSN
10591478
E-ISSN
19375956
Funding Information
Partial financial support for this research from research grants of City University of Hong Kong.
Publisher Statement
Copyright © 2014 Production and Operations Management Society. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Radhakrishnan, S., Wang, Z. & Zhang, Y. (2014), Customers’ Capital Market Information Quality and Suppliers’ Performance. Production and Operations Management, 23(10), 1690–1705. doi: 10.1111/poms.12211