FIRM PERFORMANCE and RISK in SUPPLY CHAIN NETWORKS

Firms do not exist in isolation but are linked to each other through supply chain relationships. The complexity and opacity of the network of interconnections among firms inhibit understanding of the impact of management decisions concerning the boundaries of the firm and its relationships with others. My dissertation proposes to answer the following questions regarding firm performance and risks in supply chain networks. First (Chapter 1), how do a firm's suppliers and customers affect its performance? How does a firm-level shock propagate in the supply chain network? By leveraging recently available data on supply chain relationships, my results show that supplier and customer returns explain firm performance as reflected in stock returns, which are also predicted by supplier-lagged returns. I also show credit shock propagation in the supply chain network. Second(Chapter 2), how do the network position and the number of connections to a firm affect its risk? For the effects from multiple connections, I find that the network centrality measures have different risk implications for firms operated in different industries. Specifically, more central firms in the manufacturing (logistics) industry have lower (higher) risk. Further, I develop a theoretical model to explain systematic risk derived from the supply chain network structure and the correlation of firm-level shocks. Third (Chapter 3), facing many partners in the supply chain network, does buyer direct financing outperform an outside financial intermediary? Using a three-party game theoretical model, I show that when possessing proprietary information, the manufacturer only has an edge in offering financing directly if the supplier has extremely low asset value. This simplifies supply chain network analysis as the issues for financing, which should be mostly offered by outside financial intermediaries, can be separated under an optimal configuration.