Market Reactions to

Sustainability Initiatives
and Violations
Jasmina Tacheva
Department of Operations Management and
Strategy

The Three-Headed
Monster of Sustainability
Can progress across the three pillars be
achieved simultaneously, considering that
their objectives are at odds with each
other?
If perfect synergy is not realistically
possible, how do variations across the
three pillars interact with each other in the
eyes of stakeholders?

Fig. 1: United Nations Forum on Sustainability

Standards (UNFSS)

Research Questions
Sustainable Operations should be assessed not
just through efficiency but also through
effectiveness.
1.How do sustainability initiatives and violations
across the supply chain change stakeholders
perceptions?
2.What factors should managers take into
consideration when deciding on a sustainability
practice?

Literature Review
Acquiring stakeholder social support is no less important
than securing resources (Freeman, 1984; Vergne, 2012);
The joint effect of disapproval and stigmatization (Vergne,
2012);
Institutional deflection as a possible explanation of the
perpetuation of questionable unsustainable practices
(Crane, 2013);
The company as an actor on the continuum between
agency theory (Pettigrew, 1987) and population ecology
(Hannan & Freeman, 1977)
An unowned view of firms (MacKay and Chia, 2013).

Conceptual Model

Content Analysis
Range: 2013-2015
Database: Factiva
Keyword Search: Positive (sustainable OR environmental
OR social OR green OR labor OR Worker) AND (Initiative OR
Innovation OR Energy) OR (supplier OR collaborator OR
competitor); Negative
Companies: Top 25 Retailers for 2015
N: 5094 news
items
Focal
Focal
Focal
Focal
Total
Initiative
Alone

Initiative
with
Supplier

Initiative
with
Competitor

Initiative
with Other

744 (41%)

495 (27%)

238 (13%)

356 (19%)

Focal
Violation

Focal
Violation
from
Supplier

Focal
Focal
Violation with Violation
Competitor
with Other

Total

1,167 (36%)

781 (24%)

452 (14%)

3,261

861 (26%)

1,833

Hypotheses
Hypothesis 1: Sustainability initiatives in which the focal
company includes a key supplier or an unrelated other company
will lead to a stronger positive market reaction expressed by
higher abnormal returns following the announcement than
initiatives in which the focal company acts on its own or those in
which it is not a unique player.

Hypotheses
Hypothesis 2: With a negative sustainability-related news
revelation, the negative market reaction as measured by
negative abnormal returns following the announcement will be
stronger in the case of the focal firm being singled out as a sole
perpetrator or the case of a group of competitors from the same
industry, as compared to the situation of a supplier of the focal
firm being accused, or the focal firm along with unrelated firms
from other industries.

Managerial DecisionMaking Factors

Other
Environmenta
l Operations
Rival
Environmenta
l Operations
Supplier
Tier
Tier
Tier
Supplier
Supplier
1 1 1
Environmenta
Environmenta
Environmenta
l Operations
l Operations
l Operations
Company
Environmenta
l Operations

Methodology
Empirical verification
Event Study:
5,094 Factiva news items for the top 25 retailers in the
period 2013-2015;
Compute standardized abnormal return (SAR) per company
per time period;
Compute cumulative abnormal return (CAR) for each
company (McWilliams and Siegel, 1997);
Assumptions:
Market Efficiency
Event Unexpectedness

Thank you!