Supply Chain Risk: Changes in Supplier Composition and Vertical Integration

Using textual analysis of earnings conference calls, we quantify firms' supply chain risk and its sources.Our proxy for supply chain risk exhibits large cross-sectional and time-series variation that aligns with reasonable priors and is unprecedently high during the Covid-19 pandemic.In addition, a firm exhibits high supply chain risk when its suppliers also do so.We find that firms that experience an increase in supply chain risk establish relationships with closer and domestic suppliers and with suppliers that are industry leaders, but also continue to work with suppliers in other continents.In addition, firms that do not face financial constraints become more likely to engage in vertical mergers and acquisitions.