Essays on Supply-Chain Shocks and Financing

Recent events have highlighted the vital role and fragility of global supply chains. The COVID-19 pandemic, the blockage of the Suez Canal in 2021, geopolitical tensions between the U.S. and China, and the Russia-Ukraine war, are examples of contemporary and exogenous events that have disrupted global production networks. The essays of this dissertation aim to contribute to the growing literature on supply chains by providing much-needed systematic evidence on how different shocks affect these chains.
The first essay shows that the COVID-19 pandemic indeed threatened the supply chains, as reflected by disruptions in the flow of trade credit in Europe. Countries with more relaxed initial public-health policies experienced greater disruptions. A relaxed initial response deviated from the precedent of stringent actions set by, e.g., the World Health Organization’s recommendations and Italy’s lockdown in early March 2020. Such deviations in governments’ policies likely created a public-health policy uncertainty (PHPU). This PHPU seems to have made firms more cautious in their extension of trade credit. The uncertainty effect was highest among downstream firms, where the decrease in trade-credit extension was most severe.
The second essay shows how supply chains are more likely to fragment if one or more firms in the chain experience high ESG risk (defined as a high level of negative media attention related to ESG incidents). The effect is more pronounced when the high ESG risk occurs for downstream firms, and when it is associated with a consumer boycott. Furthermore, access to trade credit is negatively impacted for misbehaving firms with high ESG risk. This effect is also more pronounced for downstream firms. Thus, after corporate irresponsibility, customer firms can be punished by suppliers in terms of supply-chain relationships and financing.
The third essay contributes to the literature by providing evidence of supply-chain fragmentation during systemic financial crises. The fragmentation effect is especially pronounced if the crisis occurs at a firm with a higher upstreamness in the chain. This finding could indicate that downstream customers are more likely to terminate old (and foster new) supply-chain relationships, in order to limit input disruptions.
Collectively, the essays focus on disruptions of supply chains. They analyze disrupted supply-chain financing during a global pandemic, the negative impact of corporate irresponsibility on supply-chain longevity and financing, and the termination of supply-chain relationships due to systemic financial crises. Thus, this dissertation comprises three distinct essays that together enhance the literature on supply-chain shocks and financing.