Supply Chain Disruptions and Causal Outcomes: Evidence from the Bankruptcy of Hanjin Shipping

40 Pages Posted: 18 Dec 2018 Last revised: 20 Dec 2018

See all articles by Caleb Kwon

Caleb Kwon

Harvard University - Technology & Operations Management Unit

Date Written: November 29, 2018

Abstract

This paper exploits the insolvency announcement of Hanjin Shipping in 2016 to study the causal effects of supply chain disruptions on firm outcomes and sourcing behavior. This insolvency announcement stranded cargo in transit as ports refused to unload Hanjin vessels. Over 8,300 cargo owners and $14 billion USD of cargo were affected by this announcement. I use a novel dataset that links 5 million shipments from U.S. Customs with real-time vessel movement data to identify impacted firms and the distribution of cargo delays to study their causal effects. I present four key findings. First, I show that disruptions to the flow of inventory - characterized by uncertainty in resolution - can drive firms to place large panic orders. Second, I provide novel evidence that pre-existing supply chain redundancies can benefit firms during disruptions as hedging tools. Third, I show that supply chain disruptions can cause firms to modify future sourcing strategies. Finally, instrumenting for the increases in inventory with disruption variables, I re-examine the link between excess inventory and abnormal stock returns. In contrast to prior work, I find no such associations.

Keywords: Supply chain disruptions, Hanjin Shipping, sourcing strategies, inventory management

Suggested Citation

Kwon, Caleb, Supply Chain Disruptions and Causal Outcomes: Evidence from the Bankruptcy of Hanjin Shipping (November 29, 2018). Available at SSRN: https://ssrn.com/abstract=3293272 or http://dx.doi.org/10.2139/ssrn.3293272

Caleb Kwon (Contact Author)

Harvard University - Technology & Operations Management Unit ( email )

Boston, MA 02163
United States

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