Spotlight: The impact of supplier sustainability risk on shareholder value
This week we talk to Dr. Seongtae Kim about his recent paper co-authored with Dr. Stephan Wagner and Dr. Claudia Colicchia. The paper is titled “The impact of supplier sustainability risk on shareholder value” and discusses the impact of scandals on a company’s 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 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.”