Social Sustainability and Shareholder Value: The Role of Complex Supply Networks

Social sustainability incidents often happen within complex supply networks beyond the visibility scope of focal firms. When such incidents become public, investors commonly hold focal firms accountable for the incident. Using an event study, we find significant negative performance implications of 142 social sustainability incidents within supply chains, leading to a mean abnormal return of -0.34\% for focal firms' shareholder value. By analyzing the complex supply networks up to tier 3 of the respective firms, we contribute to an understanding of how network characteristics influence investor decisions. Specifically, we find that higher horizontal complexity and focal firm's accessibility within the network mitigate the negative performance implications, whereas higher influence over the network strengthens the latter.