Stock Market Reactions to Supply Chain Disruptions and Recovery from the 2022 Shanghai Lockdown*

Abstract

This paper investigates the effects of the 2022 Shanghai lockdown and its subsequent lifting on global supply chains during the COVID-19 pandemic. We first identify four focal firms—Tesla, Volkswagen, SAIC Motors, and General Motors—most frequently cited in the news articles as experiencing supply chain disruptions due to the lockdown. Using an event study methodology, we estimate abnormal stock returns for these focal firms and their tier-1 global suppliers following the lockdown and its lifting announcements. We find significant and systematic stock market reactions for the suppliers of the focal firms, whereas the focal firms themselves do not exhibit statistically significant stock reactions. Specifically, suppliers experienced significantly negative abnormal returns during the lockdown, with the opposite effect observed upon the lifting of the lockdown. Furthermore, supplier characteristics such as capital expenditure and inventory turnover significantly influenced cumulative abnormal returns during the lockdown, while leverage and R&D intensity affected returns during the lifting event. Compared to the suppliers of benchmark firms, those of the focal firms experienced significantly more negative cumulative abnormal returns in the lockdown case, while no significant difference was observed between them in the lifting case.