Managerial Time Horizons and the Decision to Put Operational Workers at Risk: The Role of Debt

Supply chain disruption recovery in the evolving crisis-Evidence from the early COVID-19 outbreak in China

The speed of recovery from supply chain disruption has been identified as the predominant factor in building a resilient supply chain. However, COVID-19 as an example of an evolving crisis may challenge this assumption. Infection risk concerns may influence production resumption decision-making because any incidents of infection may lead to further shutdowns of production lines and undermine firms' long-term cash flows. Sampling 244 production resumption announcements by Chinese manufacturers in the early COVID-19 crisis (February-March 2020), our analysis shows that, generally, investors react positively to production resumptions. However, investors perceived the earlier production resumptions were higher risk (indicated by declined stock price). Such concerns were exacerbated by more locally confirmed cases of COVID-19 but were less salient for manufacturers with high debts (liquidity pressure). This study calls for a reassessment of the current disruption management mindset in response to new evolving crises (e.g., COVID-19) and provides theoretical, practical, and policy implications for building resilient supply chains.

Firm-specific political risk: a systematic investigation of its antecedents and implications for vertical integration and diversification strategies

Purpose

Uncertainties caused by political risks can drastically affect global supply chains. However, the supply chain management literature has thus far developed rather limited knowledge on firms' perception of and reactions to increased political risks. This study has two main purposes: to explore the relationship between extant risk exposure and perceived firm-specific political risk and to understand the impact of firm-specific political risk on firms' vertical integration and diversification strategies.

Design/methodology/approach

The authors developed a unique dataset for testing our hypotheses. Specifically, the authors sampled manufacturers (SIC20-39) listed in the United States from 2002 to 2019. The authors collected financial and diversification data from Compustat, vertical integration data from the Frésard-Hoberg-Phillips Vertical Relatedness Data Library and political risk data from the Economic Policy Uncertainty database. This data collection process yielded 1,287 firms (8,329 observations) with available data for analysis.

Findings

A two-way fixed-effect regression analysis of panel data revealed that firms tend to be more sensitive to political risk when faced with income stream uncertainty or strategic risk. By contrast, exposure to stock returns uncertainty does not significantly influence firms' sensitivity toward political risk. Moreover, firm-specific political risk is positively associated with vertical integration and product diversification. However, firm-specific political risk does not result in higher levels of geographical diversification.

Originality/value

This study joins the literature that systematically explores the antecedents and implications of firm-specific political risk, thus broadening the scope of supply chain risk management.