The impact of reshoring decisions on shareholder wealth

Abstract

Interest in reshoring, defined as the return of manufacturing and service operations from previously offshored locations to the U.S., has gained momentum recently. Yet, there is no academic evidence on the shareholder value implications of reshoring decisions. This paper analyzes the shareholder wealth effects of 37 reshoring decisions announced by U.S. firms during 2006–2015. Our results indicate that reshoring announcements result in positive abnormal stock returns. Mean (median) abnormal stock returns on reshoring announcements are 0.45% (0.29%), corresponding with a mean (median) market value change of $322.57 million ($31.60 million). Our findings imply that the benefits associated with the reshoring tend to outweigh the costs. This finding is relevant for firms faced with the decision of whether to move business activities from offshore to domestic locations. It is also of interest to policy makers who may seek to further stimulate the reshoring phenomenon.

Does social media elevate supply chain importance? An empirical examination of supply chain glitches, Twitter reactions, and stock market returns

“…Hypothesis 1 proposes a negative stock market return associated with a supply chain glitch. Similar studies have examined stock market returns to publicly announced events using the event study method (Brandon-Jones, Dutordoir, Frota Neto, & Squire, 2017;Modi, Wiles, & Mishra, 2015). Because prior studies provide excellent summaries of this method (Kothari & Warner, 2006;MacKinlay, 1997;McWilliams & Siegel, 1997), we limit our discussion here to a brief summary of the steps we undertook.…”

Backshoring and nearshoring: An overview

“…Since supply chains have been transformed in recent years, moving from a local to a global dimension, backshoring strategies should take these changes into account (Bettiol, Burlina, Chiarvesio, & Di Maria, ). Another reason to favour government and industry incentives stimulating backshoring, is based on the empirical evidence indicating that the benefits of backshoring usually outweigh the costs (Brandon‐Jones, Dutordoir, Neto, & Squire, ).…”

Cost-benefit AHPSort for performance analysis of offshore providers

“…Indeed, the longer lead-times (as usual in offshore outsourcing) implies higher inventory levels to meet customers' expectations and thus raise their associated costs (Kumar and Wilson 2009). This matter is even pointed out as a driver in reshoring and insourcing decisions (Fratocchi et al 2016;Brandon-Jones et al 2017). In fact, it has become a challenge to maintain inventory to a minimum when complex pieces and equipment have been outsourced to distant regions, as in this case study.…”

“…Hence, the business profitability and market position of the client firm could be severely damaged. It is no wonder that today some companies are even considering the possibility of bringing their offshore outsourincing activities back home (Barbieri et al 2018;Di Mauro et al 2018;Brandon-Jones et al 2017). In this way, it has been empirically analysed whether offshoring and reshoring strategies have provided better or worse cost performance, cost accouting capabilities and operational performance (Stentoft et al 2018).…”