Relationship Specific Investment,Bargaining Power and Firm Default Risk:A Study Based on Structural Analysis of Profit Flows
A supply chain is typically characterized by mutual benefit and risk sharing based on member coordina-tion and the integration of material flow,fund flow,and information flow.Engaging in supply chain cooperation may have an impact on firms in both positive and negative ways.Many empirical studies explore the effects of various supply chain characteristics on a firm's default risk;however,few of them have investigated the relationship between relationship-specific investment(RSI),bargaining power,and a firm's default risk.RSI could intensify the supply-chain relationship,decrease production and operation costs,and increase the profit of the whole chain.Nevertheless,bargaining power determines which party takes more profits and which party takes more risks.Firms with little bargaining power only get a small share,but even so,they must commit to RSI.In this circumstance,they will suffer a high lock-in risk of RSI and face more uncertainties in cash flow management.Accordingly,their profit margin may fall over time,capital turnover may slow down,and default risk may increase to a relatively higher level.It focuses on a supply chain with N upstream firms and M downstream customers and a structural framework is built to study the impact of a supplier firm's RSI on its debt default risk.It first models the supply decision of upstream firms,the demand decision of downstream customers,and a supplier firms'optimal RSI decision.It also defines an upstream firm's bargaining power as its capacity to get the RSI-induced surplus,and a customer's bargaining power as its capacity to force upstream firms to reduce the basic price.Then,it estimates a supplier firm's equilibrium profit and develops a profit-flow-based structural approach to quantify its debt default risk.Finally,it makes numerical simulations in different market environments and alternative competitive scenarios and evaluates the influence of a supplier firm's optimal RSI and the bargaining powers of both parties on its profit flow and debt default risk.The result shows a supplier firm's optimal RSI always helps increase its profit and decrease its default risk at all price levels.With an increase in substitutability between suppliers,a supplier firm's bargaining power decreases.Its RSI plays a limited role in increasing profit;nevertheless,it still leads to an obvious decrease in its default risk.In addition,a supplier firm's bargaining power increases with the number of competing suppliers when substitutability between them is low.Thus,its RSI could help to increase the profit considerably and decrease the default risk significantly.However,a supplier firm's bargaining power decreases with the number of competing suppliers when substitutability between them is high.In this case,the RSI could not improve its profit significantly,but it still helps to reduce its default risk.Furthermore,a customer's bargaining power also changes with the substitutability between suppliers,which then affects a supplier firm's profit flow and debt default risk.It contributes to the existing literature by investigating how a supplier firm's RSI decision and the bargaining pow-ers of players in a supply chain influence its default risk in alternative competitive scenarios.It is also theoreti-cally valuable in developing a new structural approach to default risk based on the profit flows and coordination mechanisms of the supply chain.It extends the traditional structural models of default risk that only focus on the change in a firm's asset value.It is expected that this structural approach will be used to quantitatively evaluate the impacts of other important supply chain characteristics,such as supplier/customer concentration and trade credit,on firms'default risk.
relationship specific investmentbargaining powersupply chainstructural analysisdefault risk
NETL
NSTL
万方数据
