How Does Supply Chain Transparency Influence Idiosyncratic Risk in Newly Public Firms: The Moderating Role of Firm Digitalization

Article

Zheng, L. J., Islam, N., Zhang, J. Z., Wang, H. and Au, K. M. A. 2024. How Does Supply Chain Transparency Influence Idiosyncratic Risk in Newly Public Firms: The Moderating Role of Firm Digitalization. International Journal of Operations and Production Management. In Press. https://doi.org/10.1108/IJOPM-08-2023-0689
AuthorsZheng, L. J., Islam, N., Zhang, J. Z., Wang, H. and Au, K. M. A.
Abstract

Purpose:
This study seeks to explore the intricate relationship among supply chain transparency, digitalization, and idiosyncratic risk, with a specific focus on newly public firms. The objective is to determine whether supply chain transparency effectively mitigates idiosyncratic risk within this context and to understand the potential impact of digitalization on this dynamic interplay.

Design/methodology/approach:
The study utilizes data from Initial Public Offerings (IPOs) on China’s Growth Enterprise Board (ChiNext) over the last five years, sourced from the CSMAR database and firms’ annual reports. The research covers the period from 2009 to 2021, observing each firm for five years post-IPO. The final sample comprises 2645 observations from 529 firms. The analysis employs the Hausman test, considering the panel-data structure of the sample and favoring fixed effects over random effects. Additionally, it applies the highdimensional fixed effects (HDFE) estimator to address unobserved heterogeneity.

Findings:
The analysis initially uncovered an inverted U-shaped relationship between supply chain transparency and idiosyncratic risk, indicating a delicate equilibrium where detrimental effects diminish and beneficial effects accelerate with increased transparency. Moreover, this inverted U-shaped relationship was notably more pronounced in newly public firms with a heightened level of firm digitalization. This observation implies that firm digitalization amplifies the impact of transparency on a firm’s idiosyncratic risk.

Originality:
This study distinguishes itself by providing distinctive insights into supply chain transparency and idiosyncratic risk. Initially, we introduce and substantiate an inverted Ushaped correlation between supply chain transparency and idiosyncratic risk, challenging the conventional linear perspective. Secondly, we pioneer the connection between supply chain transparency and idiosyncratic risk, especially for newly public firms, thereby enhancing comprehension of financial implications. Lastly, we pinpoint crucial digital conditions that influence the relationship between supply chain transparency and idiosyncratic risk management, offering a nuanced perspective on the role of technology in risk management.

JournalInternational Journal of Operations and Production Management
Journal citationIn Press
ISSN0144-3577
Year2024
PublisherEmerald Publishing Limited
Accepted author manuscript
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File Access Level
Anyone
Digital Object Identifier (DOI)https://doi.org/10.1108/IJOPM-08-2023-0689
Publication dates
Online30 Apr 2024
Publication process dates
Accepted18 Mar 2024
Deposited19 Mar 2024
Copyright holder© 2024, Emerald Publishing Limited
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