Financial Reports Based Proxies for Bargaining Power of Buyers and Sellers

Abstract

The objective of this exploratory analysis is to introduce proxies for the bargaining power of buyers (suppliers) and provide some initial evidence regarding their ability to account for cross sectional variations in profitably measures. We leverage information that is readily available to modern analysts and managers, i.e., SEC filed statements, in order to generate a count of buyers (suppliers) of a focal firm. We argue that as this number is rising the bargaining power of the focal firm’s buyers (suppliers) is declining. Preliminary results based on univariate non-parametric tests indicate that firms ranked high in terms of the suggested proxies, i.e., their buyers (suppliers) have low bargaining power, perform better than their peers which are ranked low on the same proxies.