Extant research in corporate finance defines the firm as a nexus of explicit and implicit contracts with a variety of stakeholders. Earlier works have mainly been focussed on the relations between the firm and its financial stakeholders, such as the owners of the firm and the firm's creditors. More recently, however, researchers have started to recognize the importance of nonfinancial stakeholders, such as the firm's customers, suppliers, rivals, and labour force, and to investigate the role that they play on the firm's characteristics and corporate policies. In this paper we focus our attention on the supply chain and review the theoretical and empirical research on how two types of nonfinancial stakeholders, customers and suppliers, affect a firm's financial decisions such as capital structure, risk taking, dividend policy, and earnings management. We also summarize extant research on the spillover effect along the supply chain.
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