Abstract

This paper explores whether customers' stock price crash risk affects their suppliers' investment efficiency. Using a supply-chain sample of Chinese A-share listed firms from 2009 to 2020, we find that suppliers' investment inefficiency is positively associated with their customers' stock price crash risk. Moreover, the impact of customers' stock price crash risk is more pronounced for suppliers with lower investment efficiency, weaker bargaining power, weaker innovation capability, and fewer investment opportunities. Our results suggest that information asymmetry along supply chains deteriorates the investment decision making of upstream firms from the perspective of capital market.