Predicting the Supply chain impacts on investment behaviour due to the COVID-19 outbreak - Evidence from Indian Stock Market

Abstract

Purpose: As the Covid-19 virus originated from China, there was an anti-China sentiment all over the world. The purpose of our study is to find out whether this anti-China sentiment affected the stock return of the companies dependent on Chinese supply chain vis-à-vis the companies those do not have a Chinese supply chain link.
Methodology: To analyze the impact of announcements on lockdown and relief measures by the government on stock market data, we use the dummy variable approach in the event methodology suggested by Karafiath (1988). We observe the stock market reaction to lockdown and relief measure announcements on consecutive seven days after the announcement.
Findings: Overall findings show us that investors did not have a negative outlook on firms with Chinese suppliers. The investors are either not aware of the companies' Chinese supply link or do not consider these at the time of investing. The potential problems associated with supply chain disruptions are overlooked if we do not consider the supply chain information when investing.
Originality: Our paper is unique because there is no study on the supply chain glitches of Indian companies’ dependent on the Chinese supply chain due to the Covid-19 breakout.