The effect of supply chain disruptions on shareholder wealth in small and mid-cap companies

Abstract

PurposeSupply chain disruptions can have severe negative consequences on companies. However, studies measuring the financial impacts of supply chain disruptions are largely confined to developed nations and large companies. Therefore, this study aims to analyze the impact of supply chain disruption on small companies in the context of an emerging nation. Further, an attempt has been made to classify supply chain disruptions and measure its impact by its type.Design/methodology/approachIn this research, the event study on 335 supply chain disruption events for a 10 year period starting from 2009 to 2019 has been used.FindingsThe results state that the Indian small and medium companies lost −4.49% of shareholder wealth in disruption. The findings also indicate that the financial and environmental disruptions can have severe effect on shareholder wealth as compared to other category.Research limitations/implicationsThe study is confined to a developing country. Considering multiple countries can provide comparative results and therefore a global consensus could be achieved.Practical implicationsThe outcomes of the results help managers to plan and prioritize supply chain disruptions, regulatory authorities can plug any possible insider trading practices for small companies in the event of supply chain disruptions. Investors can plan and take prudent investing decisions based on the nature of the disruptions.Originality/valueTo the best of the knowledge, this is the first study measuring the supply chain disruption effects on smaller companies in an emerging nation. The study is also novel in incorporating financial disruptions and measuring source wise impact on shareholder wealth.