Supplier Concentration and Tone Management: Evidence From China

ABSTRACT By analysing the influence of concentrated suppliers on disclosure tone, we provide empirical evidence that managers inflate the tone in forward‐looking statements. This effect is more pronounced in firms with weak bargaining power, suggesting that managers strategically emphasise favourable information to preserve bargaining positions. Furthermore, the incentive for tone manipulation is particularly prominent among firms requiring relationship‐specific investments (RSIs) or better trade credit terms—such as those facing financial constraints or cash shortages—but is muted when the supplier–customer information asymmetry is low. Evidence shows that firms presenting a more positive tone obtain more trade credits and RSIs in the following years.