Skipworth, HeatherAktas, EmelSchelp, Priscilla2024-05-282024-05-282022-04https://dspace.lib.cranfield.ac.uk/handle/1826/21731Aktas, Emel - Associate SupervisorPurpose and Rationale: It is known that supply chain disruptions have a negative stock price effect and that the effect is stronger if these are caused by catastrophes. However, these effects of hurricane-induced supply chain disruptions on stock price remain unexplored, even though the annual average hurricane damage in the US due to hurricanes is $54bn, of which $9bn is to commercial businesses. This thesis aims to: 1. Explore, classify and connect the three concepts of natural disasters, supply chain disruption (SCD) and firm financial performance in one framework. 2. Identify potentially influencing factors and test if, and in which way, these influence the effect of hurricanes on stock price. 3. Define a statistical model to evaluate the effect of hurricanes on stock price. The main focus is on manufacturing firms. Design/Methodology/Approach: This research is quantitative. The daily closing value of 625 manufacturing companies that were listed on the NYSE between 2014 and 2018 was analysed. Autoregressive Integrated Moving Average (ARIMA) was applied in combination with intervention analysis to model the stock price time series. In total six deduced hypotheses were tested. The statistical interruptions in stock prices due to hurricane announcements and hurricane incident announcements were investigated. The method allowed estimation of the magnitude and temporal patterns of change by applying transfer functions. Multiple factors that potentially influence the magnitude or pattern of the stock price reaction were tested, including details of damage. Findings: Both hurricane incident announcements and hurricane announcements negatively affect a firm’s stock price, mostly in the form of a transitory change. Industry moderates the stock price reaction to hurricane announcements. Minor supply chain disruptions are the only impacts resulting in a positive reaction. Providing details on actual damage leads to less negative and mostly positive reactions. Companies providing information on preventive closures are unlikely to suffer a negative reaction. Practical Implications: Hurricane risk needs to be actively managed by firms in all sectors; however, the preparation needs to be sector-specific. Firms should focus their efforts on managing supply chain disruptions. Additionally, firms need to communicate in a transparent way to reduce shareholders’ uncertainty and increase trust, so that the stock prices reactions are less negative. Originality: This thesis provides a single framework connecting disasters, supply chain disruptions and firm performance, thereby bridging supply chain management and financial economics literature. The thesis evaluates the effect of hurricane-induced supply chain disruptions for the first time. It does not analyse just the effect of hurricane incident announcements but also hurricane announcements and compares both. Autoregressive integrated moving average (ARIMA) in combination with an intervention model was applied as an alternative to the frequently used event study methodology. This approach is chosen to evaluate the effect of hurricane announcements and hurricane incident announcements on the daily stock price time series of the firms in scope. Longer term effects can be evaluated, and the best fitting transfer functions are assessed. The model accounts for autocorrelation, trend, seasonality, and drift patterns. Additionally, the effect of the following potentially influencing factors was tested as these have only been touched on in the existing literature so far: impact type, impact extent, detailed damage, and preventive closure.en-UK© Cranfield University, 2022. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright holder.Supply Chain Risk ManagementDisasterCatastropheHurricaneSupply Chain DisruptionShare PriceTime Series AnalysisARIMA-intervention modelThesis or dissertation