Examining the influence of supply chain glitches on shareholder wealth: does the reason matter?

Abstract

This paper investigates how different reasons for supply chain glitches influence shareholder wealth. Prior research indicated that supply chain glitches can decrease shareholder wealth by a staggering 10.28%. We argue that the reason for the supply chain glitch is an important moderator for understanding how supply chain glitches affect shareholder wealth. In this paper we re-assess the effect of supply chain glitches on shareholder wealth for a new time period (i.e. 2001-2012) whilst including the moderators from the original study (growth prospects, firm size, debt-equity ratio and timing) and adding the reason for the supply chain glitch as an important new moderator. Our results show that on average supply chain glitches decrease shareholder wealth by 1.94%. Further, our results indicate that supply chain glitches that arise due to regulatory, catastrophic and infrastructural reasons trigger more significant negative reactions in financial markets as compared with glitches that occur from the supply side. We discuss the implications of our findings both for theory building and for business practice, and end with limitations and suggestions for future research.

The Impact of Supplier Sustainability Risk on Shareholder Value

“…This study examines ethical sourcing issues from a risk perspective, often termed SSR, and its economic consequences. Compared to the field of SDR (e.g., Hendricks & Singhal, 2003, 2005Wagner & Bode, 2008;Zsidisin et al, 2016), empirical research on this topic has been neglected. There is anecdotal evidence on how a SSR damages the buying firm, but we still do not know how much.…”

“…However, no significant difference in shareholder value losses was found between process‐related (−.93 percent) and product‐related risks (−1.14 percent). This evidence has been rarely explored within the SSR literature, and this lack of research is more pronounced when compared to research on SDRs (e.g., Hendricks & Singhal, , ; Kumar, Liu & Scutella, ; Zsidisin, Petkova & Dam, ). By providing rigorous evidence, the results of this study contribute to the ongoing discussion on SSR, an emerging topic where most of the literature is either conceptual or case study‐based (e.g., Busse et al., ; Foerstl et al., ; Giannakis & Papadopoulos, ).…”

“…More recently, Zsidisin et al. () found that such supply chain disruptions (2000–12) decrease U.S. firms’ ( n = 116) shareholder value by only 1.94 percent. Indeed, as echoed by Zsidisin et al.…”

“…Indeed, as echoed by Zsidisin et al. (, p. 79), “[US] firms may currently be better able to manage and recover more quickly from supply chain glitches.” The magnitude of our results is comparable with that of recent SDR studies.…”

“…However, using the same approach, Kumar et al (2015) found that U.S. firms (n = 310) that suffered from disruptions (2003-12) experience a .79 percent decrease in shareholder value, which is not as severe as previously found. More recently, Zsidisin et al (2016) found that such supply chain disruptions (2000-12) decrease U.S. firms' (n = 116) shareholder value by only 1.94 percent. Indeed, as echoed by Zsidisin et al (2016, p. 79), "[US] firms may currently be better able to manage and recover more quickly from supply chain glitches."…”