Work

How Do Investors React to Supplier Exploitation? Event Study and Experimental Evidence

Year: 2026

Type: article

Abstract: ABSTRACT Supplier exploitation, including financial squeezing, payment delays, and non‐contractual demands, is a pervasive form of corporate misconduct. This multi‐method study examines how investors interpret supplier exploitation amid competing ethical and financial considerations. Using an event study of 233 enforcement actions by the Korea Fair Trade Commission (KFTC), we find a significant negative investor reaction, with firms losing an average of 1.24% in market value. This negative market reaction is stronger for firms receiving greater media attention but weaker for more profitable buyers. To explore the underlying behavioral mechanisms, we conduct an incentivized vignette experiment with experienced investors. The experiment reveals that anticipated public moral judgment (viewing exploitation as wrongful) and profit‐driven considerations (viewing exploitation as rational misconduct) jointly shape investor reactions. Specifically, buyer profitability tips the balance by reducing the weight placed on moral concerns while increasing the emphasis on financial considerations. Supplemented by practitioner interviews, this study provides novel evidence on the overall negative, yet complex economic consequences of supplier exploitation.

Source: Journal of Operations Management

DOI: 10.1002/joom.70044

Authors: Seongtae Kim, Sangho Chae, Han Kyul Oh

Institutions: Aalto University, University of Warwick, Tilburg University

Language: English

Topic: Corporate Social Responsibility Reporting

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Peace, justice, and strong institutions, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,520