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【Wu Kai】Supplier Concentration and the Speed of Capital Structure Adjustment

Published:2024-03-14  Views:

Recently, Associate Professor Kai Wu in collaboration with Yi Liu and Maher Kassar, Ph.D. students at Stevens Institute of Technology, and Ruan Sirui, a graduate student at Renmin University of China, had their paper "Supplier Concentration and the Speed of Capital Structure Adjustment" officially accepted and published online in the internationally renowned journal Pacific-Basin Finance Journal.

The paper utilizes data from China's A-share listed companies from 2012 to 2019 to study the impact of supplier concentration on the speed of corporate capital structure adjustment. The research finds that supplier concentration is positively correlated with the speed of corporate capital structure adjustment. This positive relationship is unidirectional, mainly concentrated in over-leveraged companies rather than under-leveraged ones. Furthermore, the impact mechanism primarily originates from the monitoring role of suppliers, which mitigates agency problems by reducing information asymmetry between informed managers and uninformed market participants, as well as curbing managerial opportunism and shirking. Further research reveals that companies with higher supplier concentration are more actively engaged in securities market activities, which can be attributed to the reduced agency costs resulting from supplier monitoring.

The research results indicate that supplier concentration is an important factor influencing the dynamic adjustment of corporate capital structure, revealing the significance of supply chain management and customer-supplier relationships. The study provides important insights into understanding how companies adjust their capital structure in response to changes in the external environment.

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