Two essays on supply chain variations : evidence from cost behaviors and audit outcomes

  • Ho Yin WONG

Student thesis: PhD Thesis (Lingnan)


Recent researches shed light on the information role of major customers of the supplier firms on a variety of users, including shareholders (Dhaliwal et al., 2016), debtholders (Campello and Gao, 2017) and analysts (Guan et al, 2015). However, scarce researches are developed to address the influences of major customers information on corporate managers’ and auditors’ decision-making.

My thesis is composed of two essays. The first essay examines if characteristics in terms of length (the layers of intermediaries in the supply chain) and width (customer concentration) influence the extent of responsiveness in adjusting corporate capacity. Using a sample of non-financial U.S. firms between 1978 and 2012, I find that channel length is negatively associated with cost responsiveness, which is consistent with the notion that the longer the length, the greater the demand signal noises that hinder firms from making capacity planning. In addition, I also find a negative association between channel width and cost responses, which is consistent with the argument that the greater the concentration ratio, the greater relationship specific investment, which leads to lower cost responsiveness. Overall, the findings help us to understand how capacity is influenced by supply chain variations.

The second essay examine if the industry homogeneity of audit clients and their major customers influence auditors in performing the audit risk assessments and the associated audit procedures. Using a sample of U.S. firms between 2002 and 2012, I find that auditors could exert less efforts on engagements in which audit clients and their major customers are in the same industry. However, the willing to share the cost savings to audit clients depends on the positioning of the auditor. Particularly, I find that industry expert auditors do not undercut audit fee as a result of cost reductions. These pieces of findings deepen our understanding of the audit pricing behaviors.
Date of Award20 Jun 2019
Original languageEnglish
Awarding Institution
  • Lingnan University
SupervisorLixin Nancy SU (Supervisor) & Agnes LO (Co-supervisor)

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