The Real Effects of Supply Chain Transparency Regulation – Evidence from Section 1502 of the Dodd-Frank Act

53 Pages Posted: 23 Aug 2021 Last revised: 20 Feb 2024

See all articles by Bok Baik

Bok Baik

Seoul National University

Omri Even-Tov

Haas School of Business - UC Berkeley

Russell Han

University of Illinois at Urbana-Champaign

David Park

Seoul National University

Date Written: April 19, 2023

Abstract

Section 1502 of the Dodd-Frank Act requires SEC-registered issuers to conduct supply chain due
diligence and submit conflict minerals disclosures (CMDs) that indicate whether their products
contain tantalum, tin, tungsten, or gold (3TG) sourced from the Democratic Republic of the Congo
(DRC) or its neighboring countries (“covered countries”). Consistent with the reputational cost
hypothesis, we find that heightened public attention to CMDs increases responsible sourcing. After
Section 1502 takes effect, we find higher demand for 3TG products processed in certified smelters,
decreased conflicts in covered countries’ mining regions relative to other regions, and reduced
sensitivity of conflict risk to conflict minerals’ price spikes. Lastly, we find that conflicts decrease
in Eastern DRC territories with prevalent 3T (tantalum, tin, and tungsten) mines but increase in
territories with prevalent gold mines. Overall, our findings highlight the real effects of enhanced
supply chain transparency regulation.

Keywords: Real effects, Dodd-Frank Act, Conflict minerals disclosures, Nonfinancial disclosure, Corporate social responsibility, Responsible sourcing, ESG, Due diligence, Supply chain, Resource curse

JEL Classification: C23, D22, D74, G14, G18, G38, K2, L2, M41, M48, O13, Q34

Suggested Citation

Baik, Bok and Even-Tov, Omri and Han, Russell and Park, David, The Real Effects of Supply Chain Transparency Regulation – Evidence from Section 1502 of the Dodd-Frank Act (April 19, 2023). University of Chicago, Becker Friedman Institute for Economics Working Paper Forthcoming, George J. Stigler Center for the Study of the Economy & the State Working Paper No. Forthcoming, Available at SSRN: https://ssrn.com/abstract=3908233 or http://dx.doi.org/10.2139/ssrn.3908233

Bok Baik

Seoul National University ( email )

Seoul
Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

Omri Even-Tov (Contact Author)

Haas School of Business - UC Berkeley ( email )

Haas School of Business
Berkeley, CA 94720
United States
3104302236 (Phone)

Russell Han

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL Champaign 61820
United States

David Park

Seoul National University ( email )

Seoul
Korea, Republic of (South Korea)
+1 082101029564796 (Phone)

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