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Using equity market reactions and network analysis to infer global supply chain interdependencies in the context of COVID-19

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  • Zhang, Si Ying

Abstract

While the COVID-19 pandemic has exposed the vulnerabilities of “just-in-time” international supply chains and is set to further accelerate their reconfigurations, very little is known about how global production networks are linked together at the firm level, making it difficult to assess where the dependencies lie. In this study, we use firm-level data on customer-supplier relationships from over 170 economies and network analysis tools to map global supply chain dependencies and shed light on the complex interconnections that facilitated the propagation of COVID-19’s economic impact. Leveraging the early virus outbreak in China as an exogenous shock, we first study the equity price responses of China-linked firms to news of virus-induced lockdowns, finding that markets priced in significant transmission effects of the coronavirus shock across global supply chains. Then, we dive deeper into the production networks of three globalised industries, whose unique and convoluted network structures may serve as a reminder that “reshoring” supply chains is easier said than done.

Suggested Citation

  • Zhang, Si Ying, 2021. "Using equity market reactions and network analysis to infer global supply chain interdependencies in the context of COVID-19," Journal of Economics and Business, Elsevier, vol. 115(C).
    • Handle: RePEc:eee:jebusi:v:115:y:2021:i:c:s0148619520304185
    DOI: 10.1016/j.jeconbus.2020.105974
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    Cited by:

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    2. Zsuzsanna Bacsi & Mária Fekete-Farkas & Muhammad Imam Ma’ruf, 2023. "A Graph-Based Network Analysis of Global Coffee Trade—The Impact of COVID-19 on Trade Relations in 2020," Sustainability, MDPI, vol. 15(4), pages 1-32, February.
    3. Boubaker, Sabri & Goodell, John W. & Pandey, Dharen Kumar & Kumari, Vineeta, 2022. "Heterogeneous impacts of wars on global equity markets: Evidence from the invasion of Ukraine," Finance Research Letters, Elsevier, vol. 48(C).
    4. Yasanur Kayikci & Nazlican Gozacan‐Chase & Abderahman Rejeb & Kaliyan Mathiyazhagan, 2022. "Critical success factors for implementing blockchain‐based circular supply chain," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 3595-3615, November.
    5. Sally Chen & Eric Tsang & Leanne Si Ying Zhang, 2023. "Global supply chain interdependence and shock amplification - evidence from Covid lockdowns," BIS Quarterly Review, Bank for International Settlements, March.
    6. Hassan Younis & Malek Alsharairi & Hammad Younes & Balan Sundarakani, 2023. "The impact of COVID-19 on supply chains: systematic review and future research directions," Operational Research, Springer, vol. 23(3), pages 1-31, September.

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    More about this item

    Keywords

    Event study; Stock returns; Supply chain; Network analysis; COVID-19;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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