THE IMPACT OF SUPPLIER SUSTAINABILITY RISK ON

SHAREHOLDER VALUE
Authors:
SEONGTAE KIM AND STEPHAN M. WAGNER
Swiss Federal Institute of Technology Zurich

CLAUDIA COLICCHIA
University of Hull

About:
Published In: Journal of Supply Chain Management
Year: 2019,
Volume 55(1)
Pages71–87
DOI: https://doi.org/10.1111/jscm.12188
Copy Rights Reserved ©2018 Wiley Periodicals, Inc.

Keywords: Supplier Sustainability Risk; Social Performance; Corporate Social Responsibility;

Insurance-Like Value; Shareholder Wealth

Summary:
Starting from a couple of incidents happened in Dhaka, Bangladesh in 2012 & 2013 and moving
towards who should be blamed for these. Author has mentioned the usual outcomes/results after
these types on incidents like boycotts. Moreover the author has associated these incidents with
supplier’s unethical behavior and It goes without saying that such incidents can have negative
consequences for the buying firms. The study was aimed to fulfill the gap by examining the
magnitude of the financial consequences of what are termed supplier sustainability risks (SSRs).
SSRs are the damaging effects that a buying firm has to bear when news of its suppliers’
ethical/moral misconduct become public. Author has mentioned two types of supplier
sustainability risks.
For this the researchers had conduct an event based study analysis which was followed by a
sample size if 196 U.S. publicly traded firms’ SSRs that was model on basis of regression
modeling. The results of study were supplier sustainability risks SSRs are connected with only a
1.00 percent diminution in investor (shareholders) wealth. Although the market reacts negatively
to these incidents but not differently to the two types of supplier sustainability risks SSRs:
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.
Well, this study too has some limitations that should be acknowledged, that will open path and
enlighten passage for future researches. This study examined only the immediate stock price
impact of SSRs. Not only stock price and shareholders but SSRs can also triggered stakeholder
immediate reactions and that can affect the future plans of investments Also, these findings are
only based on a sample of 196 publicly traded US firms. The investor reaction to SSRs may vary
in European, Asian or other markets.