Shareholder Wealth Effects of Modern Slavery Regulation

47 Pages Posted: 4 Jul 2017 Last revised: 3 Oct 2018

See all articles by Paul D. Cousins

Paul D. Cousins

University of Manchester - Manchester Business School

Marie Dutordoir

University of Manchester - Manchester Business School

Benn Lawson

University of Cambridge - Judge Business School

Joao Quariguasi Frota Neto

University of Manchester - Alliance Manchester Business School

Date Written: September 23, 2018

Abstract

We examine the shareholder wealth effects of the adoption of the UK Modern Slavery Act (MSA) in 2015. The MSA’s Transparency in Supply Chains clause introduced new reporting requirements mandating certain firms to provide an annual statement outlining their actions to tackle modern slavery in their business and supply chains. An event study of stock price reactions of UK firms covered by the MSA to eight events associated with its adoption provides no evidence of abnormal stock returns. We do, however, uncover significant cross-sectional differences in stock price reactions, with results suggesting that the MSA provides a competitive advantage to firms with a demonstrated track record of addressing slavery risk. By contrast, we do not find evidence of an impact of firms’ pre-regulatory Corporate Social Responsibility disclosure on stock price reactions. Our findings highlight the economic value for companies of maintaining socially responsible sourcing practices, and inform the current policy debate on the importance of greater transparency in corporate supply chains.

Keywords: Modern Slavery Act; supply chain transparency; event study; socially responsible sourcing; CSR disclosure

Suggested Citation

Cousins, Paul D. and Dutordoir, Marie and Lawson, Benn and Quariguasi Frota Neto, Joao, Shareholder Wealth Effects of Modern Slavery Regulation (September 23, 2018). Available at SSRN: https://ssrn.com/abstract=2995175 or http://dx.doi.org/10.2139/ssrn.2995175

Paul D. Cousins

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Marie Dutordoir

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Benn Lawson (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

Joao Quariguasi Frota Neto

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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