Effects of supply chain disruptions due to COVID-19 on shareholder value. Issue 13 (24th October 2022)

• Record Type: Journal Article
• Authors: Choudhury, Nishat Alam; Kim, Seongtae; Ramkumar, M.
• Is Part Of: International journal of operations & production management. Volume 42:Issue 13.2022)
• Page Start: 482
• Page End: 505
• Publication Date: 2022-10-24
• Subjects: COVID-19 -- Supply chain disruption -- Signaling theory -- Event system theory -- Stock market reaction; Production management -- Periodicals; Business logistics -- Periodicals; 658.5
• DOI: 10.1108/IJOPM-03-2022-0173
• Languages: English
• ISSNs: 0144-3577

Abstract

Abstract : Purpose: The 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/approach: This 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. Findings: On 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/value: This 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.