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CN 34-1054/N

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Open AccessOpen Access JUSTC Management 21 March 2023

Supply chain contagion of perk consumption: Who is more likely to be corrupted?

  • 1.

    School of Management, University of Science and Technology of China, Hefei 230026, China

  • 2.

    School of Public Affairs, University of Science and Technology of China, Hefei 230026, China

  • 3.

    School of Management, Hefei University of Technology, Hefei 230009, China

Cite this:
https://doi.org/10.52396/JUSTC-2022-0031
More Information
  • Author Bio:

    Yulu Zheng is a postgraduate student at the School of Management, University of Science and Technology of China. His research interests include behavioral operation management and supply chain management

    Liang Wan is an Associate Research Fellow at the School of Public Affairs, University of Science and Technology of China (USTC). He received his Ph.D. degree from the USTC in 2015. His research mainly focuses on the green economy and consumer behaviors

  • Corresponding author: E-mail: wanl001@ustc.edu.cn
  • Received Date: 10 February 2022
  • Accepted Date: 16 June 2022
    • Available Online: 21 March 2023
    Abstract

  • Abstract

    The contagion of interfirm behaviours along the supply chain has become a significant issue for both supply chain management and the internal governance of firms within the supply chain. By means of panel data of 1893 mated supply chain pairs collected from Chinese listed firms, we examine the supply chain contagion effect of corruption-related perk consumption by investigating whether firms’ perk consumption is influenced by their supply chain peers. We find a unilateral contagion effect of corrupt perk consumption along the supply chain, i.e., only from suppliers to customers. We suggest that suppliers exert this unilateral contagion effect by influencing customers’ managerial culture and the close business relationship between them. In addition, the unilateral contagion effect would be weakened when customers have a high level of employee salary.

    Graphical abstract

    The contagion effect of managerial corruption, i.e., perk consumption, along the supply chain.

    Abstract

    The contagion of interfirm behaviours along the supply chain has become a significant issue for both supply chain management and the internal governance of firms within the supply chain. By means of panel data of 1893 mated supply chain pairs collected from Chinese listed firms, we examine the supply chain contagion effect of corruption-related perk consumption by investigating whether firms’ perk consumption is influenced by their supply chain peers. We find a unilateral contagion effect of corrupt perk consumption along the supply chain, i.e., only from suppliers to customers. We suggest that suppliers exert this unilateral contagion effect by influencing customers’ managerial culture and the close business relationship between them. In addition, the unilateral contagion effect would be weakened when customers have a high level of employee salary.

    • Public Summary

    • We find a unilateral contagion effect of corrupt perk consumption along the supply chain, i.e., only from suppliers to customers.
    • To the best of our knowledge, we are the first to investigate whether and how the corrupt perk consumption of firms is influenced by their peers in the supply chain.
    • Our empirical results suggest that in the supply chain, the supplier’s perk consumption can positively influence that of its customers. This enhances our understanding of the determinants of managerial perk consumption.

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    • References(37)
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    Galaskiewicz J. Studying supply chains from a social network perspective. Journal of Supply Chain Management, 2011, 47 (1): 4–8. doi: 10.1111/j.1745-493x.2010.03209.x
    [2]
    Aydin A, Parker R P. Innovation and technology diffusion in competitive supply chains. European Journal of Operational Research, 2018, 265 (3): 1102–1114. doi: 10.1016/j.ejor.2017.08.047
    [3]
    Todo Y, Matous P, Inoue H. The strength of long ties and the weakness of strong ties: Knowledge diffusion through supply chain networks. Research Policy, 2016, 45 (9): 1890–1906. doi: 10.1016/j.respol.2016.06.008
    [4]
    McFarland R G, Bloodgood J M, Payan J M. Supply chain contagion. Journal of Marketing, 2008, 72 (2): 63–79. doi: 10.1509/jmkg.72.2.63
    [5]
    Chu Y, Wang L. Capital structure along the supply chain: How does customer leverage affect supplier leverage decisions? Quarterly Journal of Finance, 2017, 7 (4): 1750014. doi: 10.1142/s2010139217500148
    [6]
    Dai R, Liang H, Ng L. Socially responsible corporate customers. Journal of Financial Economics, 2021, 142 (2): 598–626. doi: 10.1016/j.jfineco.2020.01.003
    [7]
    Nguyen M C, Dang V A, Nguyen T T. The transfer of risk taking along the supply chain. 2021. http://dx.doi.org/10.2139/ssrn.3139547. Accessed February 1, 2022
    [8]
    De Sousa Monteiro M, Viana F L E, de Sousa-Filho J M. Corruption and supply chain management toward the sustainable development goals era. Corporate Governance, 2018, 18 (6): 1207–1219. doi: 10.1108/cg-01-2018-0031
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    [11]
    Kim S, Wagner S M. Examining the stock price effect of corruption risk in the supply chain. Decision Sciences, 2021, 52 (4): 833–865. doi: 10.1111/deci.12487
    [12]
    Zhang H, Song Y, Ding Y. What drives managerial perks? An empirical test of competing theoretical perspectives. Journal of Business Ethics, 2015, 132 (2): 259–275. doi: 10.1007/s10551-014-2320-7
    [13]
    Nguyen T T, Nguyen M C, Bui H Q, et al. The cash-holding link within the supply chain. Review of Quantitative Finance and Accounting, 2021, 57 (4): 1309–1344. doi: 10.1007/s11156-021-00979-0
    [14]
    Cheng L T W, Chan R Y K, Leung T Y. Impact of perk expenditures and marketing expenditures on corporate performance in China: The moderating role of political connections. Journal of Business Research, 2018, 86: 83–95. doi: 10.1016/j.jbusres.2018.01.046
    [15]
    Xu N, Li X, Yuan Q, et al. Excess perks and stock price crash risk: Evidence from China. Journal of Corporate Finance, 2014, 25: 419–434. doi: 10.1016/j.jcorpfin.2014.01.006
    [16]
    He L, Conyon M J, Fang J. Do Chinese CEOs consume abnormal perks before leaving their firms? Academy of Management Proceedings, 2014, 2014 (1): 10758. doi: 10.5465/ambpp.2014.10758abstract
    [17]
    Cen L, Dasgupta S. The economics and finance of customer-supplier relationships. 2021. https://ssrn.com/abstract=3832460. Accessed February 1, 2022.
    [18]
    Koberg E, Longoni A. A systematic review of sustainable supply chain management in global supply chains. Journal of Cleaner Production, 2019, 207: 1084–1098. doi: 10.1016/j.jclepro.2018.10.033
    [19]
    Wang C Y, Wang Q, Zheng S S, et al. Peer effects of bank loan portfolio on systemic insolvency risk: Evidence from China. Applied Economics, 2021, 53 (30): 3457–3473. doi: 10.1080/00036846.2021.1883527
    [20]
    Hendricks K B, Jacobs B W, Singhal V R. Stock market reaction to supply chain disruptions from the 2011 Great East Japan Earthquake. Manufacturing & Service Operations Management, 2019, 22 (4): 683–699. doi: 10.1287/msom.2019.0777
    [21]
    Kamann D J F, Bakker E F. Changing supplier selection and relationship practices: A contagion process. Journal of Purchasing and Supply Management, 2004, 10 (2): 55–64. doi: 10.1016/j.pursup.2003.12.002
    [22]
    Leaey M T, Roberts M R. Do peer firms affect corporate financial policy? Journal of Finance, 2014, 69 (1): 139–178. doi: 10.1111/jofi.12094
    [23]
    Green K. The contagion of lean inventory management in the supply chain. Thesis. Fayetteville, AR: University of Arkansas, 2018
    [24]
    Li S Y, Zhao X D, Huo B F. Supply chain coordination and innovativeness: A social contagion and learning perspective. International Journal of Production Economics, 2018, 205: 47–61. doi: 10.1016/j.ijpe.2018.07.033
    [25]
    Huang Q, Kim R. Capital structure decisions along the supply chain: Evidence from import competition. Journal of International Business Studies, 2019, 50 (6): 873–894. doi: 10.1057/s41267-019-00225-9
    [26]
    Peng X, Wang X Y. Does customer stock price crash risk have the contagion effects on their suppliers. Journal of Finance and Economics, 2018, 44 (2): 141–153. doi: 10.16538/j.cnki.jfe.2018.02.011
    [27]
    Oh F D. Contagion of a liquidity crisis between two firms. Journal of Financial Economics, 2013, 107 (2): 386–400. doi: 10.1016/j.jfineco.2012.08.018
    [28]
    Loon Y C, Zhong Z K. The impact of central clearing on counterparty risk, liquidity, and trading: Evidence from the credit default swap market. Journal of Financial Economics, 2014, 112 (1): 91–115. doi: 10.1016/j.jfineco.2013.12.001
    [29]
    Carrothers A. An empirical evaluation of the determinants of executive perks at S&P 500 firms.Global Journal of Research in Management, 2017, 7 (2): 1–27. doi: 10.2139/ssrn.3028735
    [30]
    Ting H I, Huang P K. CEOs’ power and perks: Evidence from Chinese banks. Journal of Economics and Business, 2018, 97: 19–27. doi: 10.1016/j.jeconbus.2018.02.003
    [31]
    Cai H, Fang H, Xu L C. Eat, drink, firms, government: An investigation of corruption from the entertainment and travel costs of Chinese firms. The Journal of Law and Economics, 2011, 54 (1): 55–78. doi: 10.1086/651201
    [32]
    Yermack D. Flights of fancy: Corporate jets, CEO perquisites, and inferior shareholder returns. Journal of Financial Economics, 2006, 80 (1): 211–242. doi: 10.1016/j.jfineco.2005.05.002
    [33]
    Berry H M, Guillén M, Zhou F N. An institutional approach to cross-national distance. J. Int. Bus. Stud., 2010, 41 (9): 1460–1480. doi: 10.1057/jibs.2010.28
    [34]
    Capaldo A, Giannoccaro I. How does trust affect performance in the supply chain? The moderating role of interdependence. International Journal of Production Economics, 2015, 166: 36–49. doi: 10.1016/j.ijpe.2015.04.008
    [35]
    Jian J H, Li H Q, Meng L, et al. Do policy burdens induce excessive managerial perks? Evidence from China’s stated-owned enterprises. Economic Modelling, 2020, 90: 54–65. doi: 10.1016/j.econmod.2020.05.002
    [36]
    Huang K, Shang C, Zhang C. Working hard for long-distance relationships: Geographic proximity and relationship-specific investments. Financial Management, 2021, 50 (4): 985–1011. doi: 10.1111/fima.12338
    [37]
    Chu Y, Tian X, Wang W. Corporate innovation along the supply chain. Management Science, 2019, 65 (6): 2445–2466. doi: 10.1287/mnsc.2017.2924
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    [1]
    Galaskiewicz J. Studying supply chains from a social network perspective. Journal of Supply Chain Management, 2011, 47 (1): 4–8. doi: 10.1111/j.1745-493x.2010.03209.x
    [2]
    Aydin A, Parker R P. Innovation and technology diffusion in competitive supply chains. European Journal of Operational Research, 2018, 265 (3): 1102–1114. doi: 10.1016/j.ejor.2017.08.047
    [3]
    Todo Y, Matous P, Inoue H. The strength of long ties and the weakness of strong ties: Knowledge diffusion through supply chain networks. Research Policy, 2016, 45 (9): 1890–1906. doi: 10.1016/j.respol.2016.06.008
    [4]
    McFarland R G, Bloodgood J M, Payan J M. Supply chain contagion. Journal of Marketing, 2008, 72 (2): 63–79. doi: 10.1509/jmkg.72.2.63
    [5]
    Chu Y, Wang L. Capital structure along the supply chain: How does customer leverage affect supplier leverage decisions? Quarterly Journal of Finance, 2017, 7 (4): 1750014. doi: 10.1142/s2010139217500148
    [6]
    Dai R, Liang H, Ng L. Socially responsible corporate customers. Journal of Financial Economics, 2021, 142 (2): 598–626. doi: 10.1016/j.jfineco.2020.01.003
    [7]
    Nguyen M C, Dang V A, Nguyen T T. The transfer of risk taking along the supply chain. 2021. http://dx.doi.org/10.2139/ssrn.3139547. Accessed February 1, 2022
    [8]
    De Sousa Monteiro M, Viana F L E, de Sousa-Filho J M. Corruption and supply chain management toward the sustainable development goals era. Corporate Governance, 2018, 18 (6): 1207–1219. doi: 10.1108/cg-01-2018-0031
    [9]
    Silvestre B S. Sustainable supply chain management in emerging economies: Environmental turbulence, institutional voids and sustainability trajectories. International Journal of Production Economics, 2015, 167: 156–169. doi: 10.1016/j.ijpe.2015.05.025
    [10]
    Silvestre B S, Monteiro M S, Viana F L E, et al. Challenges for sustainable supply chain management: When stakeholder collaboration becomes conducive to corruption. Journal of Cleaner Production, 2018, 194: 766–776. doi: 10.1016/j.jclepro.2018.05.127
    [11]
    Kim S, Wagner S M. Examining the stock price effect of corruption risk in the supply chain. Decision Sciences, 2021, 52 (4): 833–865. doi: 10.1111/deci.12487
    [12]
    Zhang H, Song Y, Ding Y. What drives managerial perks? An empirical test of competing theoretical perspectives. Journal of Business Ethics, 2015, 132 (2): 259–275. doi: 10.1007/s10551-014-2320-7
    [13]
    Nguyen T T, Nguyen M C, Bui H Q, et al. The cash-holding link within the supply chain. Review of Quantitative Finance and Accounting, 2021, 57 (4): 1309–1344. doi: 10.1007/s11156-021-00979-0
    [14]
    Cheng L T W, Chan R Y K, Leung T Y. Impact of perk expenditures and marketing expenditures on corporate performance in China: The moderating role of political connections. Journal of Business Research, 2018, 86: 83–95. doi: 10.1016/j.jbusres.2018.01.046
    [15]
    Xu N, Li X, Yuan Q, et al. Excess perks and stock price crash risk: Evidence from China. Journal of Corporate Finance, 2014, 25: 419–434. doi: 10.1016/j.jcorpfin.2014.01.006
    [16]
    He L, Conyon M J, Fang J. Do Chinese CEOs consume abnormal perks before leaving their firms? Academy of Management Proceedings, 2014, 2014 (1): 10758. doi: 10.5465/ambpp.2014.10758abstract
    [17]
    Cen L, Dasgupta S. The economics and finance of customer-supplier relationships. 2021. https://ssrn.com/abstract=3832460. Accessed February 1, 2022.
    [18]
    Koberg E, Longoni A. A systematic review of sustainable supply chain management in global supply chains. Journal of Cleaner Production, 2019, 207: 1084–1098. doi: 10.1016/j.jclepro.2018.10.033
    [19]
    Wang C Y, Wang Q, Zheng S S, et al. Peer effects of bank loan portfolio on systemic insolvency risk: Evidence from China. Applied Economics, 2021, 53 (30): 3457–3473. doi: 10.1080/00036846.2021.1883527
    [20]
    Hendricks K B, Jacobs B W, Singhal V R. Stock market reaction to supply chain disruptions from the 2011 Great East Japan Earthquake. Manufacturing & Service Operations Management, 2019, 22 (4): 683–699. doi: 10.1287/msom.2019.0777
    [21]
    Kamann D J F, Bakker E F. Changing supplier selection and relationship practices: A contagion process. Journal of Purchasing and Supply Management, 2004, 10 (2): 55–64. doi: 10.1016/j.pursup.2003.12.002
    [22]
    Leaey M T, Roberts M R. Do peer firms affect corporate financial policy? Journal of Finance, 2014, 69 (1): 139–178. doi: 10.1111/jofi.12094
    [23]
    Green K. The contagion of lean inventory management in the supply chain. Thesis. Fayetteville, AR: University of Arkansas, 2018
    [24]
    Li S Y, Zhao X D, Huo B F. Supply chain coordination and innovativeness: A social contagion and learning perspective. International Journal of Production Economics, 2018, 205: 47–61. doi: 10.1016/j.ijpe.2018.07.033
    [25]
    Huang Q, Kim R. Capital structure decisions along the supply chain: Evidence from import competition. Journal of International Business Studies, 2019, 50 (6): 873–894. doi: 10.1057/s41267-019-00225-9
    [26]
    Peng X, Wang X Y. Does customer stock price crash risk have the contagion effects on their suppliers. Journal of Finance and Economics, 2018, 44 (2): 141–153. doi: 10.16538/j.cnki.jfe.2018.02.011
    [27]
    Oh F D. Contagion of a liquidity crisis between two firms. Journal of Financial Economics, 2013, 107 (2): 386–400. doi: 10.1016/j.jfineco.2012.08.018
    [28]
    Loon Y C, Zhong Z K. The impact of central clearing on counterparty risk, liquidity, and trading: Evidence from the credit default swap market. Journal of Financial Economics, 2014, 112 (1): 91–115. doi: 10.1016/j.jfineco.2013.12.001
    [29]
    Carrothers A. An empirical evaluation of the determinants of executive perks at S&P 500 firms.Global Journal of Research in Management, 2017, 7 (2): 1–27. doi: 10.2139/ssrn.3028735
    [30]
    Ting H I, Huang P K. CEOs’ power and perks: Evidence from Chinese banks. Journal of Economics and Business, 2018, 97: 19–27. doi: 10.1016/j.jeconbus.2018.02.003
    [31]
    Cai H, Fang H, Xu L C. Eat, drink, firms, government: An investigation of corruption from the entertainment and travel costs of Chinese firms. The Journal of Law and Economics, 2011, 54 (1): 55–78. doi: 10.1086/651201
    [32]
    Yermack D. Flights of fancy: Corporate jets, CEO perquisites, and inferior shareholder returns. Journal of Financial Economics, 2006, 80 (1): 211–242. doi: 10.1016/j.jfineco.2005.05.002
    [33]
    Berry H M, Guillén M, Zhou F N. An institutional approach to cross-national distance. J. Int. Bus. Stud., 2010, 41 (9): 1460–1480. doi: 10.1057/jibs.2010.28
    [34]
    Capaldo A, Giannoccaro I. How does trust affect performance in the supply chain? The moderating role of interdependence. International Journal of Production Economics, 2015, 166: 36–49. doi: 10.1016/j.ijpe.2015.04.008
    [35]
    Jian J H, Li H Q, Meng L, et al. Do policy burdens induce excessive managerial perks? Evidence from China’s stated-owned enterprises. Economic Modelling, 2020, 90: 54–65. doi: 10.1016/j.econmod.2020.05.002
    [36]
    Huang K, Shang C, Zhang C. Working hard for long-distance relationships: Geographic proximity and relationship-specific investments. Financial Management, 2021, 50 (4): 985–1011. doi: 10.1111/fima.12338
    [37]
    Chu Y, Tian X, Wang W. Corporate innovation along the supply chain. Management Science, 2019, 65 (6): 2445–2466. doi: 10.1287/mnsc.2017.2924
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