Abstract:

Supplier relationship is an important precursor relationship of enterprises' production and operation activities， which not only affects the distribution of enterprises' working capital， but also inevitably reshapes corporate financialization. However， it is unclear how a firm’s supplier relationship affects its financialization. Based on industrial competition theory and relational contract theory， a hypothesis of “risk effect” of high supplier concentration is proposed. According to the supply chain management theory， it is assumed a “synergic effect” of high supplier concentration. In order to verify these two hypotheses， the relation between supplier concentration and corporate financialization is examined.A-share listed firms from 2010-2018 as research sample are selected， and financial industry firms are excluded， samples of missing supplier information are eliminated， and firms without financial investment are removed. Adopting the purchase ratio from the largest supplier and top five suppliers as the measuring of supplier concentration， the ratio of financial assets is used to total assets as a proxy variable of financialization. How supplier concentration impacts on financialization is investigated using OLS regression model， aiming to reveal the mechanism and the resulting economic consequences between supplier concentration and financialization.The results show that there is an inverted U-shaped relationship between supplier concentration and financialization. Mechanism analysis finds that it is “synergistic effect” of supplier concentration on financialization on the left of the inflection point， namely the higher supplier concentration， the lower the operating cost rate， the faster the inventory turnover， the less cash to pay on procurement. The synergistic effect produced by the supplier relationship leads to more free funds for the firm， and further the firm invests financial assets. On the right side of the inflection point， there is a “risk effect” of supplier concentration on financialization. That is， the higher supplier concentration is， the more resources are occupied， the more margins are eroded， the more serious risk are taken. The risk effect leads to no longer be able to bear the financialization of risk， thus reduce its financial assets. The research shows that the degree of supplier concentration in Chinese enterprises is characterized by the coexistence of risk effect and synergistic effect. Enterprises treat centralized supplier relationship cautiously and establish healthy cooperative relationship with upstream suppliers.

Key words: supplier concentration, corporate financialization, risk effect, synergic effect