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Supply Chain Disruptions and Stock Prices

The Effects of Hurricane-Induced Disruptions on Company Stock Price

verfasst von: Priscilla Schelp, Heather Skipworth, Emel Aktas, Beate Vieth

Verlag: Springer Nature Switzerland

Buchreihe : Palgrave Studies in Logistics and Supply Chain Management

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

Inhaltsverzeichnis

Über dieses Buch

Supply chain disruptions typically hurt stock prices, particularly if the disruption is caused by a natural disaster. While supply chains in the United States suffer from a wide range of supply chain disruptions induced by hurricanes, the impact of these disruptions on stock prices remains unexplored, even though the annual average damage in the US due to hurricanes is $54bn of which $9bn is to businesses.

This book explores, classifies, and connects natural disasters, supply chain disruption (SCD), and firm financial performance. It identifies influencing factors and how they impact the effect of hurricanes on stock prices. It defines a statistical model to quantify the effect of hurricanes on stock prices and provides guidelines to managers who need to decide how to communicate supply chain disruptions to their customers and shareholders. It will be of great interest to scholars and students in supply chain management, disaster management, and finance.

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Inhaltsverzeichnis

Frontmatter

Chapter 1. Supply Chain Risk Management

Abstract

This chapter establishes the foundational concepts of Supply Chain Risk Management (SCRM), focusing on risks arising from natural disasters. It clarifies the distinctions between risk and uncertainty, emphasising their critical roles in supply chain disruptions. The chapter explores both upside and downside risks, integrating perspectives from decision theory and finance, while addressing the debate between objective and subjective risk assessments. Positioned within the broader field of Supply Chain Management, this chapter traces the evolution of SCRM from firm-level concerns to a holistic, supply chain-wide approach. By providing a detailed typology of supply chain risks and disruptions, it offers essential insights for understanding the impact of disasters on firm performance, setting the stage for deeper exploration in subsequent chapters.

Priscilla Schelp, Heather Skipworth, Emel Aktas, Beate Vieth

Chapter 2. Hurricane Impacts on Supply Chains

Abstract

This chapter explores the impact of hurricanes on supply chains and their resulting effects on stock prices. Leveraging event studies and regression analysis, it demonstrates how hurricane-induced disruptions lead to both immediate and long-term financial consequences, often triggering significant market reactions. The analysis highlights the importance of effective Supply Chain Risk Management (SCRM) and the critical role of transparent communication in mitigating these effects. The chapter reveals that detailed damage disclosures can reduce investor uncertainty, leading to more measured stock price responses. This insight underscores the necessity for businesses to prepare and respond strategically to natural disasters.

Priscilla Schelp, Heather Skipworth, Emel Aktas, Beate Vieth

Chapter 3. Hurricane Incident Announcements Across Sectors

Abstract

This chapter examines how stock price reactions to hurricane-induced disruptions vary across different industrial sectors. By analysing NYSE-listed firms with significant physical supply chains, the study reveals that while all sectors experience impacts from hurricanes, the magnitude and nature of these effects differ significantly. Sectors such as basic industries, capital goods, and consumer non-durables exhibit the most pronounced negative stock price reactions, highlighting their vulnerability to supply chain disruptions. Conversely, sectors like healthcare and consumer durables often see positive effects, driven by increased demand post-disaster. These findings underscore the importance of sector-specific risk management strategies and the critical role of transparent communication in mitigating negative market responses.

Priscilla Schelp, Heather Skipworth, Emel Aktas, Beate Vieth

Chapter 4. Preventive Closures to Mitigate Hurricane Impacts

Abstract

This chapter investigates the impact of preventive closures, implemented by governments or companies in anticipation of hurricanes, on stock prices. By analysing historical data and reporting behaviours, the study reveals that proactive supply chain risk management, including preventive closures, often stabilises stock prices in the face of hurricane threats. These closures, whether government-mandated or voluntary, are viewed favourably by shareholders, who recognise their role in minimising long-term damage and preserving business continuity. The findings highlight the importance of transparency and proactive measures in building investor confidence and ensuring operational resilience in hurricane-prone regions.

Priscilla Schelp, Heather Skipworth, Emel Aktas, Beate Vieth

Chapter 5. Incident Announcements vs. Hurricane Announcements

Abstract

This chapter examines the differential impacts of general hurricane announcements and specific incident announcements on stock prices. By analyzing NYSE-listed firms, the study reveals that both types of announcements can significantly affect stock prices, often triggering negative reactions. The research highlights that even the anticipation of a hurricane, independent of direct impact, can influence investor behaviour. Furthermore, the study introduces a novel comparison between hurricane incident and general hurricane announcements, employing transfer functions to identify patterns of stock price reactions, predominantly observing transitory changes indicative of overreactions. These findings underscore the critical importance of timely and transparent communication in mitigating adverse stock market responses.

Priscilla Schelp, Heather Skipworth, Emel Aktas, Beate Vieth

Chapter 6. Conclusions

Abstract

This chapter synthesises the key findings of the study, emphasising the significant impact of hurricane-related events on stock prices and the importance of proactive risk management. The research highlights that hurricane announcements, whether general or specific to incidents, generally trigger negative stock price reactions. It underscores the importance of industry-specific preparation and effective supply chain risk management, with transparency in corporate communication playing a crucial role in mitigating adverse effects. The study contributes to both academic knowledge and practical applications, offering valuable insights for firms in managing hurricane-related risks and preparing for future challenges.

Priscilla Schelp, Heather Skipworth, Emel Aktas, Beate Vieth

Backmatter

Titel: Supply Chain Disruptions and Stock Prices
verfasst von: Priscilla Schelp
Heather Skipworth
Emel Aktas
Beate Vieth
Copyright-Jahr: 2024
Verlag: Springer Nature Switzerland
Electronic ISBN: 978-3-031-68885-0
Print ISBN: 978-3-031-68884-3
DOI: https://doi.org/10.1007/978-3-031-68885-0

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