Lenders often have lending relationships with borrowers' major customers (labeled as “supply-chain lenders”). We hypothesize that private information obtained from borrowers' major customers can facilitate more timely and precise evaluation of borrowers' creditworthiness; this potentially reduces supply-chain lenders' reliance on accounting conservatism in debt contracting. Consistently, we find that suppliers borrowing from supply-chain lenders provide less conservative financial statements than suppliers borrowing from non-supply-chain lenders at loan origination. This finding is more pronounced when supply-chain lenders are likely to have greater information advantage over non-supply-chain lenders. Based on latent factors that proxy for private information accessible from customers, we find that supply-chain lenders' information advantage relates to customers' future operational and financial risks. Further, in lending agreements, supply-chain lenders accept fewer accounting-based contractual terms, lower spreads, and longer loan maturity than non-supply-chain lenders. The overall evidence suggests that borrowers' major customers represent an important information channel that enables lenders to more effectively screen and monitor borrowers, thus weakening the debt contracting demand for accounting conservatism.

This study examines the antecedents and consequences of analysts choosing to become supply chain analysts (i.e., analysts following both a supplier and its major customer). We find that information complementarities between firms in the same supply chain, between a supplier firm and its industry peer firms, and between the supplier's major customer and other firms in analysts' portfolio affect their supply chain specialization decision. The potential revenues supplier firms generate for analysts' brokerage houses also significantly affect this decision. While supply chain analysts achieve superior forecast performance compared to non-supply chain analysts for supplier firms, they provide lower-quality forecasts for other firms in their portfolios. These findings suggest that analysts allocate resources strategically. Our results are robust to techniques designed to address the potential endogeneity of analysts' supply chain portfolio choices.

We investigate whether short interest affects supply chain partners' investments. This investigation is important for understanding the real effect of short sellers in facilitating stakeholders' investment decisions. Prior research suggests that short interest conveys negative news in a timely manner, which predicts future deterioration in firm fundamentals. We predict and find that a supplier's future investments decrease with its major customers' short interest. Consistent with predictions, this result is more pronounced when customers' short interest is more informative about their future performance, when customers have a more opaque information environment, and when suppliers incur lower customer switching costs. The results are robust when we use various approaches to address endogeneity concerns and establish causality. Our findings suggest that short sellers provide valuable information to supply chain partners when making investment decisions.

This paper examines why CFOs become involved in material accounting manipulations. We find that while CFOs bear substantial legal costs when involved in accounting manipulations, these CFOs have similar equity incentives to the CFOs of matched non-manipulation firms. In contrast, CEOs of manipulation firms have higher equity incentives and more power than CEOs of matched firms. Taken together, our findings are consistent with the explanation that CFOs are involved in material accounting manipulations because they succumb to pressure from CEOs, rather than because they seek immediate personal financial benefit from their equity incentives. AAER content analysis reinforces this conclusion.

The design of CEO incentives is particularly important for firms in financial distress. We compare the resolution of CEO incentive problems in distressed firms between the 1980s versus the 1990s, focusing on how changes in contractual provisions, as well as in the executive labor market, resulted in a shift to a new equilibrium. Our analyses provide evidence that the increased bargaining power of creditors, together with changes in the use of contractual provisions in the 1990s, enabled creditors to more effectively retain highly skilled CEOs with firm-specific knowledge and provide them with incentives to improve firm performance. Data Availability: Data used in this study are available from public sources identified in the article.