Shareholder wealth effects of modern slavery regulation

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the shareholder wealth effects of the adoption of the UK Modern Slavery Act 2015 (MSA). The MSA’s Transparency in Supply Chains clause introduced new reporting requirements mandating certain firms to provide an annual statement outlining how they identify and mitigate modern slavery in their business and supply chain. An event study of stock price reactions of UK firms covered by the MSA to eight events associated with its adoption provides no evidence of abnormal stock returns. We do, however, uncover significant cross-sectional differences in stock price reactions, with results suggesting that the MSA provides a competitive advantage to firms with a demonstrated track record of addressing slavery risk. We find no effects for pre-regulatory Corporate Social Responsibility disclosure levels on stock price reactions. Our findings highlight the economic value of maintaining socially responsible sourcing practices, and inform the current policy debate on the importance of greater transparency in corporate supply chains.

Bibliographical metadata

Original languageEnglish
Pages (from-to)5265-5289
Number of pages25
JournalMANAGEMENT SCIENCE
Volume66
Issue number11
Early online date26 May 2020
DOIs
Publication statusPublished - 26 May 2020

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