Supply‐Chain Network Centrality and Expected Stock Returns

ABSTRACT This paper examines how firms' positions in supply chain networks affect expected stock returns in China. Using PageRank centrality to measure network embeddedness, we document a robust negative relation between centrality and returns: peripheral firms earn higher returns than central firms. The effect survives extensive controls, alternative centrality measures, and a wide range of robustness tests. Pricing tests indicate that the return differential reflects compensation for systematic risk rather than mispricing. Further analysis shows that peripheral firms face higher operating and asset‐specificity risks, particularly in high‐asymmetry industries and among firms with weaker bargaining power, stronger competition, and tighter resource constraints.