Stock market reaction to supply chain disruptions from the 2019 Japan’s export curbs on South Korea

Abstract

If supply chain problems occur due to inventory shortages or development delays, business activities are disrupted, which negatively affects stock prices. This paper examines the impact of the Korea-Japan trade dispute in 2019 on the stock prices of Samsung Electronics and its primary suppliers. The impact of the supply chain shock caused by the incident was confirmed by calculating the excess return based on stock price data for two days including August 28, when the Japanese government took measures to exclude Korea from the whitelist. It was confirmed that a statistically significant negative excess return appeared in the stock prices of Samsung Electronics and Samsung Electronics' domestic primary suppliers due to the whitelist exclusion measure, and in the case of Samsung Electronics' Japanese primary suppliers, it was confirmed that there were statistically insignificant negative returns. Excess returns were found. In addition, the effect on excess return was identified through multiple regression analysis using variables such as individual company's sales, debt ratio, price-net-asset ratio, domestic sales dependence, and total return on equity.