Risk along the supply chain: Geographic proximity and corporate risk taking

•We examine the impact of supplier-customer geographic proximity on supplier firm risk taking.•We find that supplier-customer geographic proximity has a negative impact on supplier firm risk taking.•The negative effect is more prominent when suppliers who have lower market share, higher customer-based concentration, and higher information asymmetry due to improved monitoring and information sharing.•We employ the high speed railway construction as the instrument to restrict the potential endogeneity issues. This study investigates the effect of supplier-customer geographic proximity on corporate risk taking. We find strong evidence that supplier-customer geographic proximity reduces supplier firms risk taking. To establish causality, we investigate plausibly exogenous variation in geographic proximity caused by new built high-speed railway connections between suppliers and their customers in China. The negative effect of supplier-customer geographic proximity on suppliers’ risk taking is more prominent when the suppliers have lower bargaining power and higher information asymmetry. These findings imply that the monitoring and information sharing are possible underlying channels, through which supplier-customer geographic proximity influences suppliers risk taking.