The Long‐Run Roles of Supply Chain Stability: Evidence From Chinese Family Controlled IPOs

ABSTRACT The stability of customer‐supplier relationships in initial public offerings (IPOs) constitutes a significant yet understudied source of firm‐specific information that can mitigate asymmetric information problems. Analyzing China's family‐controlled IPOs, we document that firms with stable supply chains exhibit significantly higher initial returns and superior long‐term stock performance. Portfolio tests confirm a significant annualized premium of 4.8% for a strategy that goes long in high‐stability firms and shorts low‐stability ones. This stability premium is most pronounced immediately after listing. We demonstrate that it arises through two distinct mechanisms by signaling stronger earnings prospects and by enhancing the informativeness of stock prices about fundamental value. Our findings establish supply chain stability as a credible non‐financial signal that complements traditional valuation metrics and shapes investor perception during the critical transition to public markets.