The Impact Of Lawsuit On Market Value Of Firm And Supply Chain

In recent years,supply chian management get more and more attention of scholars and firm's decision maker.However,the amount of lawsuit is increasing year by year.As we know,due to the famous “green-red” lawsuit,Jia Duobao didn't go public.This firm spend too much money on the lawuit causing to the failure of plan.We must take our eyes on the lawsuit event.There are many research on the lawsuit,but few scholars do research on the impact of lawsuit from the perspective of supply chain management.This artle will do resreach on the relastionshiop between the market value of supply chain and litigation incident,and this artlc will answer the 3 questions.What the market will react if a firm has litigation incident? What about suppliers? What about consumers?This paper empirically estimates the impact of litigatin on the market value of firm.Besides,we examine if the litigation stage,litigation status and litigation reason affect the market value of the listed company.We test the model using a sample of 2907 announcement of Chinese lawsuits which only includes filing announcement,settlement announcement and verdict announcement,happened during the period 2013-2017.The evidence suggests that,on the average,the stock market reaction of announcement day to the lawsuit is significant negative,and the abnormal stock returns on the announcement day will decrease by 0.24%.In addition,while the listed company is plaintiff,the average of abnormal return will decrease by 0.17%,the abnormal return is significant at the 5% level.The abnormal stock return to defendant will decrease by 0.28%,significant at the 1% level.Except that,we find the stock reaction to the filing incident is significant negative,but the reaction of other two types of lawsuit announcement is netrual.This paper also empirically estimates the impact of lawsuit on the market value of supply chain.We test the model using a sample of 375,including 133 supplier sample and 242 consumer sample.The evidence suggests that,on the average,the suppliers' stock market reaction of announcement day to the announcement of lawsuit is significant negative.There exists a big difference between supplier and customer.The suppliers' stock market reaction of announcement day to the announcement of lawsuit filing is significant negative,and the abnormal stock returns on the announcement day will decrease by 0.75%.Nevertheless,the costomers' stock market reaction of announcement day to the announcement of lawsuit filing is significant positive,the abnormal stock returns on the announcement day will increase by 0.45%.From the above,the firm and the supplier will negatively reacto to ligition incident,while the customer will actively react to litigation incident.Based on these results,we suggest that when a listed company has disputes with another company,it's best for the public company to find other ways to solve this dispute instead of be sued.