Publication Type

Journal Article

Version

submittedVersion

Publication Date

1-2020

Abstract

We examine the relation between information externalities along the supply chain and voluntary disclosure. Information transfers from a major customer's earnings announcement (EA) can substitute for its supplier's disclosure. Conversely, if the customer's EA increases uncertainties regarding the supplier's future prospects, it can increase the demand for disclosure. After controlling for information incorporated in supplier returns, we find that the supplier is more likely to issue earnings guidance after the customer's EA when the EA news deviates more from the market's expectation. The positive effect of the customer's news on earnings guidance is weaker when common investors, supply-chain analysts, or a common industry allow investors to better understand the value implications of the news, while the effect increases with the importance of the customer to the supplier. The effect is also stronger when EA news is negative rather than positive. Collectively, the results suggest that supply-chain relationships influence voluntary disclosure.

Keywords

customer-supplier relationship, supply chain, earnings announcement, information transfers, earnings guidance, voluntary disclosure

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Accounting Review

Volume

95

Issue

6

First Page

73

Last Page

96

ISSN

0001-4826

Identifier

10.2308/TAR-2017-0129

Publisher

American Accounting Association

Embargo Period

3-28-2021

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.2308/tar-2017-0129

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