Financial performance of supply chains after disruptions: an event study

Abstract

Purpose – This empirical analysis aims to shed light on the financial implications of supply chain design and in particular on the differences between pull- and push-type designs. The focus is on risk exposure to difficult to foresee supply disruptions, like those resulting from natural and man-made disasters. Design/methodology/approach – The event study framework is applied to the stock performance of four major personal computer (PC) producers after the 1999 earthquake in Taiwan and the computer memory price increases that ensued. Findings – It is shown that investors associate pull-type supply chains for PCs with lower profitability after abrupt component price increases. A parallel analysis of push-type producer stock returns does not show similar results. Furthermore, in-depth analysis of Dell Computer reveals that after the catastrophe-induced disruption the onset of losses to this major pull-type PC producer was very fast. Practical implications – Without condemning pull-type PC supply chains, earthquake-induced disruptions pose risks that require management attention. Originality/value – This empirical study provides evidence linking supply chain strategy and company risk structure.