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The impact of supplier sustainability risk on shareholder value

Kim, Seongtae; Wagner, Stephan M.; Colicchia, Claudia

Authors

Seongtae Kim

Stephan M. Wagner

Dr Claudia Colicchia C.Colicchia@hull.ac.uk
Senior Lecturer and Programme Director for MSc Logistics and Supply Chain Management

Abstract

Business scandals like sweatshop labor have received growing attention in the field of supply management. Yet little is known about how detrimental such scandals are to buying firms. This study aims to fill this gap by examining the magnitude of the consequences of what are termed supplier sustainability risks (SSRs). To this end, we conduct an event study analysis followed by regression modeling based on a sample of 196 US publicly traded firms' SSRs. The results reveal that SSRs are associated with a 1.00% reduction in shareholder wealth. The market reacts negatively but not differently to the two types of SSR: process-related risks and product-related risks. Finally, a firm's moral capital does play a mitigating role for SSRs and process-related risks; however, it does not provide insurance-like protection for product-related risks.

Journal Article Type Article
Publication Date 2019-01
Journal Journal of Supply Chain Management
Print ISSN 1523-2409
Electronic ISSN 1745-493X
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 55
Issue 1
Pages 71-87
Institution Citation Kim, S., Wagner, S. M., & Colicchia, C. (2019). The impact of supplier sustainability risk on shareholder value. Journal of Supply Chain Management, 55(1), 71-87. doi:10.1111/jscm.12188
DOI https://doi.org/10.1111/jscm.12188
Keywords Supplier sustainability risk; Social performance; Corporate social responsibility; Insurance-like value; Shareholder wealth
Publisher URL https://onlinelibrary.wiley.com/doi/abs/10.1111/jscm.12188?af=R