Effects of supply chain disruptions due to COVID-19 on shareholder value

Abstract

PurposeThe purpose of this research work is to examine the financial effect of supply chain disruptions (SCDs) caused by coronavirus disease 2019 (COVID-19) and how the magnitude of such effects depends on event time and space that may moderate the signaling environment for shareholder behaviors during the pandemic.Design/methodology/approachThis study analyses a sample of 206 SCD events attributed to COVID-19 made by 145 publicly traded firms headquartered in 21 countries for a period between 2020 and 2021. Change in shareholder value is estimated by employing a multi-country event study, followed by estimating the differential effect of SCDs due to the pandemic by event time and space.FindingsOn average, SCDs due to pandemic decrease shareholder value by −2.16%, which is similar to that of pre-pandemic SCDs (88 events for 2018–2019). This negative market reaction remains unchanged regardless of whether stringency measures of the firm's country become more severe. Supply-side disruptions like shutdowns result in a more negative stock market reaction than demand-side disruptions like price hikes. To shareholder value, firm's upstream or downstream position does not matter, but supply chain complexity serves as a positive signal.Originality/valueThis study provides the first empirical evidence on the financial impact of SCDs induced by COVID-19. Combining with signaling theory and event system theory, this study provides a new boundary condition that explains the impact mechanism of SCDs caused by the pandemic.

Resilience in global supply chains: analysis of responses, recovery actions and strategic changes triggered by major disruptions

“…Ivanov and Dolgui (2020) reflection on viability or the scale of survivability in SCRES analysis, initially mostly conceptual and focusing on high-demand essential items and medical product supply chains (Chowdhury et al , 2021), and later providing ongoing insights as the pandemic disruptions evolved and spread geographically. For example, Dubey et al (2021) investigated the role of frugal innovation in global supply chains, Choudhury et al (2022) studied the effect on shareholder value and Daghar et al (2022) analysed cognitive capital elements, focusing on their influence on SCRES capabilities during the pandemic. Additionally, a special issue on learnings from the pandemic (Breen and Hannibal, 2021) included a few articles addressing global supply chains, e.g.…”

Untying the Gordian knot: A systematic review and integrative framework of supply network complexity

“…Studies exploring the direct effect of SNC on business performance reveal a mixed picture. Some report no significant effect (Ateş et al., 2022; Choudhury et al., 2022; Liu et al., 2012; Wang et al., 2023), while others reveal that effectively managing operational complexities and internal complexities associated with high structural SNC leads to a positive influence on financial performance (Chedid et al., 2021; DeCampos et al., 2022). These gains likely stem initially from improvements in other performance domains, such as risk reduction through alternative suppliers, better cost structures due to increased competition, and greater access to supplier resources.…”

“…Increasingly, managers struggle with the challenges of effectively managing the ever‐increasing complexity in their supply networks (Gerschberger et al., 2023; Turner et al., 2018). Such challenges are further exacerbated by macro‐level disruptions such as the COVID‐19 pandemic, trade disputes, and geopolitical conflicts (Choudhury et al., 2022; Fan et al., 2022; Polyviou et al., 2023; Wiedmer et al., 2021).…”