The contagion and competitive effects across national borders: Evidence from the 2016 Kumamoto earthquakes



Ding, Li, Lam, Hugo KS ORCID: 0000-0002-4674-6145, Cheng, TCE and Zhou, Honggeng
(2021) The contagion and competitive effects across national borders: Evidence from the 2016 Kumamoto earthquakes. INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS, 235. p. 108115.

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Abstract

It is unclear how a natural disaster such as earthquake affects disaster-stricken firms' industry peers located in other countries. While those industry peers might benefit from the disaster due to the competitive advantage gained over the disaster-stricken firms (positive competitive effect), they might also suffer from the disaster due to their linkages to the disaster-stricken firms (negative contagion effect). Based on a natural experiment in which a series of earthquakes struck Kumamoto, Japan's Silicon Island, in April 2016, we find that the earthquakes have a negative impact on the stock returns of the semiconductor manufacturers located in China, suggesting that the contagion effect overweighs the competitive effect. Moreover, the negative impact is more pronounced for firms with supply chain connections with Japanese firms. However, we also find a positive impact among Chinese firms with high inventory turnover and customer concentration. Overall, our research reveals the dynamic effects of a natural disaster across national borders, urging firms to pay attention to the negative contagion effect through supply chain linkages and the positive competitive effect resulting from better operational efficiency.

Item Type: Article
Uncontrolled Keywords: Earthquake, Event study, Stock return, Contagion effect, Competitive effect, Operational efficiency
Divisions: Faculty of Humanities and Social Sciences > School of Management
Depositing User: Symplectic Admin
Date Deposited: 22 Mar 2021 09:39
Last Modified: 18 Jan 2023 22:55
DOI: 10.1016/j.ijpe.2021.108115
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3117789