Supply chain concentration and corporate financialization

We investigate whether firms that rely on major suppliers or customers, which is defined as supply chain concentration, tend to hold more financial assets than other firms due to supply chain pressure. We find that firms with a higher supply chain concentration have a higher financialization level....

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Bibliographic Details
Published inFrontiers in psychology Vol. 13; p. 934753
Main Authors Zou, Meifeng, Zhang, Xindong
Format Journal Article
LanguageEnglish
Published Switzerland Frontiers Media S.A 03.01.2023
Subjects
business profitability
corporate financialization
market competitive power
operating risk
Psychology
supply chain concentration
corporate financialization
supply chain concentration
operating risk
business profitability
market competitive power
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Summary:We investigate whether firms that rely on major suppliers or customers, which is defined as supply chain concentration, tend to hold more financial assets than other firms due to supply chain pressure. We find that firms with a higher supply chain concentration have a higher financialization level. The firms' competitive power reduces their financialization level but cannot reverse the adverse impact of supply chain concentration. Furthermore, we explore the mechanism underlying the relationship between supply chain concentration and corporate financialization using the mediation effect method. We find that supply chain concentration impairs firms' main business profitability, leading firms to hold more financial assets. The main business profitability channels play partial mediating roles. Our findings reveal that overdependence on large suppliers/customers causes firms to escape reality and adopt virtual economics.
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This article was submitted to Organizational Psychology, a section of the journal Frontiers in Psychology
Reviewed by: Syed Ghulam Meran Shah, University of Castilla La Mancha, Spain; Simon Grima, University of Malta, Malta
Edited by: Wangshuai Wang, Xi'an Jiaotong-Liverpool University, China
ISSN:1664-1078
1664-1078
DOI:10.3389/fpsyg.2022.934753