Internal liquidity risk, financial bullwhip effects, and corporate bond yield spreads: Supply chain perspectives

This study explores internal liquidity risk (ILR) and financial bullwhip effects on corporate bond yield spreads along supply chain counterparties by employing American market data from year 1997 to 2008. This study finds that the ILRs of suppliers and customers positively affect a firm's bond yield spreads and the effects of customers' ILRs are greater. This research also finds a financial bullwhip effect that the ILR effect becomes greater upwardly along the supply chain counterparties. The results are robust when controlling for well-known spread determinant variables.

► On the internal liquidity risk (ILR) and financial bullwhip effect along supply chain. ► Suppliers'/customers' ILR affects a firm's bond yield spreads. ► The effects of customers' ILRs are greater. ► Financial bullwhip effect exists, ILR effect is greater upwardly along supply chain. ► Effects of suppliers' ILR and information flow risk have a trade-off relationship.