How global supply chain strain shapes financial reporting behaviour

Using annual Compustat data covering 50,102 firm-year observations from 2000 to 2019 and the Global Supply Chain Pressure Index (GSCPI) from the Federal Reserve Bank of New York, we study how global supply chain disruptions affect financial reporting. We find that higher supply chain pressure is associated with lower abnormal accruals. A one-standard-deviation increase in the GSCPI reduces firm-level absolute abnormal accruals from the median to about the 26th percentile. The effect is stronger for firms audited by long-tenured auditors. Moreover, firms with higher operational complexity show stronger responses to supply chain pressure. We also show that greater supply chain pressure improves the readability of firms’ annual reports. Together, the evidence suggests that systemic supply chain shocks enhance conservatism and transparency in financial reporting, with important implications for regulators, auditors, and investors.