Abstract
This chapter addresses different uses and styles of event studies, giving a flavor and overview of the styles that might be possible. Inclusion does not imply endorsement, and the chapter will include commentary on research design decisions and issues. The examination of various articles on different topics draws attention to factors such as the complexity of study design, use of interactions or moderators, drawing from a range of diverse data sources to construct variables properly in the study. Consequently, this chapter helps to develop a sense of the richness of the study designs and issues that might be addressed through the event study method.
TopSupply Chain Management Examples And Discussions
Deitz, Hansen, and Richey (2009) presented an early study of changes over the supply chain. They examined how Walmart mandated the use of RFID and influenced major suppliers. This was an interesting case where a dominant buyer and the supply chain required their suppliers to adjust and alter the operational practices by including RFID capability for the supply chain. Because of their size and scale, Walmart would have benefited from the additional value of using RFID within the supply chain. Deitz et al. identified a positive stock market reaction for the suppliers in response to the news. Those suppliers with stronger cash flows, suggesting developed operational capabilities, experienced an even greater stock market reaction. In contrast to many other comparable event studies, the firm’s size did not appear to influence the magnitude and stock market reaction. In terms of supply chain power, negotiation capability, and influence over the supply chain, they identified that the supplies most reliant on Walmart (by evaluating the proportion of company sales to Walmart) were even more positively affected. The result suggests that the stock market investors perceived the close-knit relationship as potentially experiencing benefits in the future, as the firms make increasingly specific investments in the relationship. It opens the door to additional research that focuses on using event study methods to use power-based studies.
Key Terms in this Chapter
Signalling Theory: The study of how information is provided between two parties who have access to different information. The sender must decide on how to signal or communicate information, such as how the firm decides the information encoded in announcements and press releases.
Crisis Response: The range of actions taken to plan for and manage a disruptive event to reduce or mitigate the harm to the firm and stakeholders.
Abnormal Return: The difference between an observed movement in stock returns that is clearly different or greater than an expected normal or expected return.
Strategic Response: The shared response of the firm’s components, given their context, to achieve the desired objective.
Managerial Action: The actions that a manager can take to influence the performance they desire or target.
Resource-Based View (RBV): The theory that resources are fundamental to the success and performance of a firm.
Stock Market Reaction: A sudden and fast change in the stock prices in reaction to the event, capturing the unbiased estimate of the consequences of the news on the stock’s long-term prospects. The stock market reaction, measured by the abnormal returns, is usually the focus of the main hypothesis in the event study project.