Does the Bullwhip Matter Economically? A Cross-Sectional Firm-Level Analysis

42 Pages Posted: 22 Oct 2016

See all articles by Opher Baron

Opher Baron

University of Toronto - Operations Management

Jeffrey L. Callen

University of Toronto - Rotman School of Management

Dan Segal

Interdisciplinary Center (IDC) Herzliyah

Date Written: October 20, 2016

Abstract

This paper investigates whether the bullwhip has economic consequences at the firm level. In particular, we examine the relation between the bullwhip and various accounting/financial performance measures including equity returns, cash flows, earnings, and earnings attributes such as earnings quality and earnings persistence, using a large panel of cross-sectional firm-level data. Performance is measured both in terms of first-moment mean effects and second-moment volatility effects. Contrary to the maintained assumption of economics and operations management scholars, our analysis yields results that are inconsistent with the notion that the bullwhip has significant negative economic consequences at the firm level. In particular, we find almost no significant statistical/economic relations between accounting/financial measures of profitability and the bullwhip, both with and without covariate controls.

Keywords: Bullwhip, Earnings Attributes, Economic Consequences

JEL Classification: M11, M41

Suggested Citation

Baron, Opher and Callen, Jeffrey L. and Segal, Dan, Does the Bullwhip Matter Economically? A Cross-Sectional Firm-Level Analysis (October 20, 2016). Available at SSRN: https://ssrn.com/abstract=2856510 or http://dx.doi.org/10.2139/ssrn.2856510

Opher Baron

University of Toronto - Operations Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada

Jeffrey L. Callen

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-5641 (Phone)
416-971-3048 (Fax)

Dan Segal (Contact Author)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

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