The Impact of Generative AI Announcements on Suppliers: Evidence from the Stock Market

40 Pages Posted: 21 Oct 2024

See all articles by Zishun Qian

Zishun Qian

Huazhong University of Science and Technology - School of Management

Jing Peng

University of Connecticut - Department of Operations & Information Management

Jianbin Li

Huazhong University of Science and Technology

Date Written: September 15, 2024

Abstract

The rise of Generative AI (GenAI) technology is revolutionizing firm operations and supply chain management, profoundly influencing firms within the GenAI supply chain network. While a few emerging studies have explored the impact of GenAI initiatives on firms’ stock performance, it remains unclear how such initiatives affect the stock price movements of their supply chain partners. This paper empirically investigates the impact of firms’ GenAI initiatives on the abnormal stock returns of their suppliers by analyzing data on news, supply chain relationships, and daily stock prices. Our empirical analysis reveals that, on average, firms’ GenAI announcements lead to a positive abnormal return of 0.27% for their suppliers on the announcement day. We further investigate how this spillover effect varies across suppliers with different characteristics. The results indicate that the abnormal return is more positive for suppliers with higher levels of R&D intensity, greater sales growth, located closer to their customers, or those operating within a less competitive industry. Our findings have important implications for managers and investors.

Keywords: Generative AI, downstream innovation, supplier, spillover effect, abnormal return, event study

Suggested Citation

Qian, Zishun and Peng, Jing and Li, Jianbin, The Impact of Generative AI Announcements on Suppliers: Evidence from the Stock Market (September 15, 2024). Available at SSRN: https://ssrn.com/abstract=4957042 or http://dx.doi.org/10.2139/ssrn.4957042

Zishun Qian

Huazhong University of Science and Technology - School of Management ( email )

1037 Luoyu Road
Wuhan, Hubei 430074
China

Jing Peng (Contact Author)

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Jianbin Li

Huazhong University of Science and Technology ( email )

Wuhan, Hubei
China

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