The effect of supply chain disruptions on shareholder value

Abstract

This paper estimates the shareholder wealth affects of supply chain disruptions. The results are based on a sample of 838 disruption announcements made during 1989–2001. Shareholder wealth affects are estimated by computing the abnormal stock returns (actual returns adjusted for industry and market-wide influences) around the date when information about disruptions is publicly announced. Supply chain disruption announcements are associated with an abnormal decrease in shareholder value of 10.28%. We find that larger firms experience a less negative market reaction, and firms with higher growth prospects experience a more negative reaction. We also provide descriptive results on how sources of responsibility and reasons for disruptions affect shareholder wealth.

Keywords:

• Supply Chain Management (SCM)
• disruptions
• stock price performance
• financial and economic analysis

Notes

1. The 200-day estimation period spans days –210 through –11.