What is the impact of a conflict delisting on firm value? An investigation of the role of conflict and firm characteristics

Abstract

2007), while retailers are under increasing pressure to keep prices lower (Van Rompaey, 2022). These diverging objectives regularly result in power struggles.A prevalent instrument for resolving these conflicts is the exercise of coercive power (Frazier & Summers, 1984), where the manufacturer or retailer removes products from the shelves until the conflict is resolved. This is referred to as a conflict delisting ( Van der Maelen et al., 2017). Examples include US retailer Costco pulling Coca-Cola products from the shelves in response to a demanded price increase by the latter (Duff, 2020), and e-commerce giant Amazon withholding releases of Walt Disney movies because of a price dispute (Reuters, 2014). We were able to identify 285 Western manufacturers or retailers that were involved in a conflict delisting in a time span of 20 years, which amounts to almost 15 per year. Retail experts predict this type of conflict to occur even more often in the future (Financial Times, 2022). Despite the increasing occurrence of conflict delistings, academic research on this topic is scarce.We study the impact of a conflict delisting on firm (shareholder) value, which integrates multiple dimensions of performance (Gielens et al., 2008), using an event study approach. This approach measures the expected long-term performance consequences of conflict delistings at the time of the announcement assuming that a firm's stock price reflects the market's expectations of the discounted Conflicts are inevitable in any channel relationship (Gaski, 1984). Also in manufacturer-retailer relationships power conflicts often happen because of diverging objectives. Especially in times in which manufacturers and retailers face increased price pressure (due to, e.g., rising raw material and energy prices, inflation), the price disparity between manufacturers and retailers rises which forces manufacturers or retailers to reopen price negotiations (Van Rompaey, 2022). In these circumstances, manufacturers try to negotiate higher wholesale prices from the retailer (Geylani et al., Satish Jayachandran served as Area Editor for this article.