“Firm Performance and Risks in Supply Chain Networks” by Dr. Jing WU
Dr. Jing WU
City University of Hong Kong
Firms do not exist in isolation but are linked to each other through supply chain relationships. The complexity and opacity of the network of connections, however, inhibit the understanding of the boundaries of the firm and its relationships with suppliers and customers. We investigate the effect of these network connections on firm performance using two levels of interactions and reactions: first‐order effects from direct connections and second‐order effects from the systemic exposure to the overall economic network. We measure performance using firm stock returns as representing both expectations of future performance and exposure to systematic risk. While equity returns captures moderate firm‐level shocks well, we also use CDS data to measure large credit shocks and observe asymmetric propagation patterns from supplier and customer firms, which are explained by firm fundamental variables including inventory, cash cushion, trade credits, and industry competitiveness.