Bargaining Power, Firm Value, and Trade Credit: Evidence From Violations of Japan's Subcontract Act
Abstract
ABSTRACT Some large firms benefit substantially from strong bargaining positions because they can request price discounts from small suppliers. Furthermore, the bargaining power of large customers affects their use of trade credit. We use a direct measure of bargaining power by focusing on violations of Japan's Subcontract Act . We show that the return on assets of firms with strong bargaining power is high. However, the return on assets decreased by 1.65% on average after bargaining power could not be exercised. In addition, trade payables increase after the announcement, suggesting a negative relationship between price discounts and trade credit.
Fields of Study & Subjects
Working Capital and Financial Performance
Corporate Finance and Governance
Supply Chain and Inventory Management
Publication details
- Journal / source
- Accounting and Finance
- Volume
- 66
- Issue
- 3
- Pages
- 2288–2306
- Publication date
- 12 February 2026
- Language
- EN