The Impact of Supplier Sustainability Risk on Shareholder Value

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 as supplier sustai...

Full description

Saved in:
Bibliographic Details
Published in:The journal of supply chain management 2019-01, Vol.55 (1), p.71-87
Main Authors: Kim, Seongtae, Wagner, Stephan M., Colicchia, Claudia
Format: Article
Language:English
Subjects:
corporate social responsibility
insurance‐like value
Scandals
shareholder wealth
social performance
Stockholders
Studies
supplier sustainability risk
Suppliers
Supply chain management
Sustainability
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary: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 as supplier sustainability risks (SSRs). To this end, we conduct an event study analysis followed by regression modeling based on a sample of 196 U.S. publicly traded firms’ SSRs. The results reveal that SSRs are associated with a 1.00 percent 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.
ISSN:1523-2409
1745-493X
DOI:10.1111/jscm.12188