What question did this study set out to answer?

This research aims to explore whether reliance on a few suppliers drives firms to pursue backward integration through mergers and acquisitions to manage supply-chain risks.

February 11, 2026

Supplier concentration and corporate acquisitions: a risk-mitigation perspective

Key Points

This research aims to explore whether reliance on a few suppliers drives firms to pursue backward integration through mergers and acquisitions to manage supply-chain risks.
Analyzed supplier disclosures and M&A records from Chinese A-share firms (2001-2024) for 17,794 observations.
Measured supplier concentration using the purchase share of the largest three vendors.
Applied fixed-effects regressions and event-study methodologies to assess the impact on acquisitions.
Utilized structural equation modeling for mediation analyses involving cash and R&D investments.
A 1-standard-deviation increase in supplier concentration raises vertical acquisitions likelihood by 11%.
Deal value increases by 44% with higher supplier concentration.
Announcement returns range from 1.9% to 2.7%, with long-term buy-and-hold abnormal returns up to 17%.
After three years, the major supplier's purchase share decreases by 8%, while return on assets (ROA) improves by 9%.

Abstract

Purpose This paper aims to test whether supplier concentration (SC), dependence on a few upstream vendors, pushes firms to integrate backwards through M acquisitiveness is measured by the annual count and total value (log) of supplier-targeted deals. Fixed-effects regressions, event-study cumulative abnormal returns, long-run buy-and-hold abnormal returns (BHARs), post-deal changes in dependence and structural equation modeling mediation analyses (cash, relationship-specific R&D) constitute the empirical toolkit. Findings A one-standard-deviation increase in SC raises the likelihood of a vertical acquisition by 11% and increases deal value by 44%. Announcement returns of 1.9–2.7% and BHARs up to 17% indicate sustained value creation. Three years after completion, the major supplier’s purchase share falls by 8% and ROA improves by roughly 9%. The effect is channeled through the acquirer’s cash-richness, while the acquirer’s more relationship-specific investment dampens the impact. Originality/value The study introduces SC as a first-order determinant of takeover activity, offering fresh support for transaction-cost and resource-dependence theories. It shows that arm’s-length vertical acquisitions effectively hedge against upstream shocks, informing managers’ boundary decisions and policymakers’ efforts to bolster supply-chain resilience.

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Supplier concentration and corporate acquisitions: a risk-mitigation perspective

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