Song

Decision Sciences © 2020 Decision Sciences Institute
Volume 00 Number 0
xxx 2020
Examining the Stock Price Effect of

Corruption Risk in the Supply Chain
Seongtae Kim
Department of Information and Service Management, Aalto University School of Business,
Ekonominaukio 1, Espoo, 02150, Finland, e-mail: seongtae.kim@aalto.fi
Stephan M. Wagner†
Department of Management, Technology, and Economics, Swiss Federal Institute of Technology
Zurich, Weinbergstrasse 56/58, Zurich, 8092, Switzerland, e-mail: stwagner@ethz.ch
ABSTRACT
Although corrupt practices in the supply chain are not rare, this topic seems neglected
in the literature. This could potentially be because a supply chain focused framework is
lacking, and therefore it is difficult to measure the true impact of such issues. Why, how,
and how much does corruption damage the corresponding firm in the supply chain? Our
study takes what we term a supply chain view of corruption, and then estimates the stock
price effect of corruption from that point of view. We focus on kickbacks and bribery
issues that may damage a target firm’s reputation and its market value. In particular, we
address firms’ corrupt practices from a sustainability risk perspective with the conceptu-
alization of corruption risk (CR). Using an event study methodology, based on a sample
of 315 CR cases in the United States, we find significant market penalties for allegations
of the target firms’ CRs (triggers) and its subsequent issues (investigation, regulatory and
resolution). However, the market penalties are largely driven by triggers, not by the sub-
sequent issues. We further reveal that the stock market reacts more negatively to CRs
that occur upstream with suppliers than downstream with customers. Therefore, target
focal firms must be cautious with upstream–trigger CRs. [Submitted: October 23, 2018.
Revised: June 29, 2020. Accepted: August 3, 2020.]
Subject Areas: Attribution Theory, Corruption Risk, Event Study, Signaling

Theory, Supply Chain, and Sustainability Risk.
INTRODUCTION
Corruption, defined as “the misuse of entrusted power for private gain” (UNGC,
2016, p. 11), is a prevalent issue in business. And yet, it is often neglected in the
supply chain context. This neglect is surprising given the society’s awareness of
firms’ corrupt behavior within a supply chain. As an example, consider the Apple
bribery case. In 2010, a sourcing manager was accused of having received more
than $1 million in kickbacks from six suppliers in Asia (Kane, 2010). The sourc-
ing manager pleaded guilty a few months later, agreeing to forfeit the black money.
† Corresponding author
1
2 Examining the Stock Price Effect of Corruption Risk in the Supply Chain
Another example is the Alcoa scandal. In 2008, Alcoa’s customer Alba, a Bahraini
aluminum firm, accused Alcoa of a conspiracy involving bribery-based overcharg-
ing (Simpson, 2008), with Alcoa overcharging more than $2 billion over the past
15 years.
In this study, we focus on kickbacks and/or bribery as a behavior that may
damage a firm’s reputation and its market value. In particular, we address firms’
corrupt practices from a risk perspective, namely corruption risk (CR). The under-
lying concept of CR is built upon the definition of sustainability risk as “a condition
or a potentially occurring event that may provoke harmful stakeholder reactions”
(Hofmann, Busse, Bode, & Henke, 2014, p. 168). Thus, increased (decreased) CR
means a higher (lower) potential for adverse responses by stakeholders to the con-
dition or potentially occurring event. A CR occurs when “inside jobs”—which
are bad, scandalous or illegitimate behaviors “initially known to only their partic-
ipants” (Hirsch & Milner, 2016, p. 447)—are recognized by outsiders and after
hitting a “tipping point” become public knowledge and may provoke stakeholder
criticism (Hirsch & Milner, 2016). We consider the behaviors as disclosed to the
public when they are reported in the Wall Street Journal (WSJ).
A CR can destroy the reputation of an associated firm (EIU, 2017; Kroll,
2018) and subsequently degrade social capital, weaken its market position or de-
value the firm (Preston, 2004). For example, Arnold, Neubauer, and Schoenherr
(2012) argued that CRs could cost an affected firm on average more than $2 mil-
lion. A global survey of 729 senior executives found an average loss over the last 3
years associated with fraud, including bribery, of $8.8 million (Kroll, 2010). The
United Nations Global Compact (UNGC) also reports that the cost of CR can be
estimated at around $2.6 trillion, more than 5% of world GDP (UNGC, 2016).
These estimations are reasonable indications for how financially damaging CRs
can be to the firms.
Corruption studies provide evidence on the financial consequences by
CR-related issues such as crime and fraud (Table 1). However, there is a dearth
of studies focusing on CR in the context of supply chains. In this context, a key
distinction feature is the connection of firm activities along supply and demand
(Selen & Soliman, 2002). Thus, CR can occur upstream with suppliers (hereafter,
“upstream CR”) or downstream with customers (hereafter, “downstream CR”).
To our knowledge, no studies have examined the stock price effect of corruption
when either suppliers upstream or customers downstream are involved in the
corrupt practice. Fighting corruption requires supply chain members—especially
customers and suppliers—acting together, which has remained an unresolved
challenge (UNGC, 2016). Evidence on the extent of market value loss due to CR
in the supply chain can change a firm’s perceptions on the importance of actively
engaging in such collective action.
The purpose of this study is twofold. First, we estimate the stock price effect
of CR on the target firm in a supply chain context. In this study, target firms are
organizations that are at the center of controversy for allegedly committing corrupt
practices and therefore an object of news coverage. We set target firms as the focal
firms in the supply chain, and estimate how allegations of the target firms and its
subsequent CRs shape investors’ perceptions. For this, we build on Karpoff, Lee,
and Martin’s (2008) framework, and categorize our sample along the stages of CR.
Kim and Wagner 3
Second, we examine the differential stock price effects of upstream versus down-
stream CRs. In this study, CR is considered upstream if the parties involved are
upstream of the target firm and downstream if the parties involved are downstream
of the target firm. In our sample, the former is the case when target firms receive
a bribe/kickback from their suppliers, whereas the latter case refers to situations
where the target firms give a bribe/kickback to their customers.1
Our key finding is that the stock market penalizes firms’ CR in the supply
chain and that firms should therefore eradicate the sources of CR beforehand. How-
ever, most of the penalties were captured close to the onset of CRs (i.e., trigger).
We also find that the stock market reacts more negatively to CRs that occur up-
stream with suppliers, than downstream with customers. This finding emphasizes
to which CR issues supply chain managers should be most sensitive, namely to
upstream–trigger CRs. Our empirical results are based on a sample of 315 U.S.
publicly traded firms’ CR events, announced through the WSJ in 1984–2014.
This study contributes to the literature in several ways. First, it is the first
to investigate the stock price effect of CR (kickbacks and/or bribery) in a supply
chain context. Some studies have examined other forms of unethical behavior in
the supply chain, or their impact on firm performance or market value (e.g., Baden-
horst, 1994; Wood, 1995; Arnold et al., 2012; Kim, Wagner, & Colicchia, 2019).
Unethical behaviors in form of kickbacks and/or bribery in the supply chain ap-
pear to be present in practice, but have not yet gained sufficient attention. Given
that market valuation can be considered as the true value of firms (McWilliams &
Siegel, 1997), examining stock price effects of CRs from the supply chain view is
a novel contribution to the literature.
Second, the economic impact of a CR occurring up- and downstream a sup-
ply chain is difficult to define and measure (Ashforth, Gioia, Robinson, & Trevino,
2008). We address this challenge by analyzing CR through the lens of sustainabil-
ity risk (Hofmann et al., 2014; Busse, Kach, & Bode, 2016), and by integrating
attribution (Weiner, 1985) and signaling (Spence, 1973) theory. The notion of sus-
tainability risk is useful to explain when and how a CR materializes, and the inte-
grated theory approach will help to gain a deeper understanding of why and how
CR causes damage to a target firm (Wagner, Coley, & Lindemann, 2011). A better
understanding of the consequences of CR better equips firms to fight corruption
through collective action with partners both up- and downstream the supply chain
(UNGC, 2016).
LITERATURE REVIEW
Corruption as Sustainability Risk
In this study, as stated earlier, we examine corruption from the perspective of
sustainability risk. This idea is mainly concerned with the situation in which
1 For example, in the abovementioned cases of CR, Apple is the object of news coverage (i.e., target firm),
facing allegations of receiving more than a million dollar kickbackbrk from six suppliers (i.e., the parties
involved) in Asia. In a similar vein, Alcoa is the object of news coverage (i.e., target firm), facing allegations
of bribery-based overcharging. However, unlike the Apple case, the party involved in the Alcoa case is a state-
owned enterprise, known as Alba, who is a customer of Alcoa’s goods and services (thus, to the downstream
of the target firm). For more details, we provide excerpts from the WSJ news articles in Appendix A.
Figure 1: CR path from source, incident to effect (Source: own illustration,

adapted from Hofmann et al. (2014) and Hirsch & Milner (2016)).
firms’ illegitimate behaviors, such as corruption, provoke negative stakeholder

reactions (Foerstl, Reuter, Hartmann, & Blome, 2010; Hofmann et al., 2014;
Hajmohammad & Vachon, 2016). Hence, the existence of CR is determined by
a condition, or potentially occurring adverse event that may provoke harmful
stakeholder reactions, not merely by the probability that an adverse event may
occur.2 If stakeholders’ reactions are highly negative to the illegitimate behavior,
this means higher CRs to the associated target firms. The same is true in reverse
if the reactions are less negative, or even nonnegative.
The notion of sustainability risks is built upon the triple bottom line view
of sustainability that consists of three dimensions: environmental (planet), social
(people), and economic (profit) (Elkington, 1997; Carter & Rogers, 2008; Wu &
Pagell, 2011). It is thus natural that sustainability risks can be categorized into
the three aspects (Kim et al., 2019). We elucidate CRs as an economic, profit-side
sustainability risk.
Figure 1 presents how a CR manifests and affects a target firm. In fact, the
offending firms can remain safe in “contained deviance,” as long as internal cor-
rupt practices do not leak to outsiders (Arnold et al., 2012; Jackson & Brammer,
2014; Hirsch & Milner, 2016). For instance, while overcharging customer Alba,
Alcoa remained in “contained deviance” for more than 10 years (Simpson, 2008).
Outsiders only became aware of this inside practice when customer Alba sued
Alcoa in 2008, and this fraudulent activity became “public knowledge” when the
United States opened a bribery-based overcharging investigation against Alcoa.
The “tipping point” occurs during this time of transition, particularly when the
outsiders publicize the case. All these can be sources of CR that may cause certain
2Typically, risk can be defined as a combination of probability of an adverse event occurring and conse-
quence of the event. Accordingly, the extant literature describes CR as a combination of probability that
corruption may occur and the consequence associated with the adverse event (e.g., Hansen, 2011; Fazekas,
Toth, & King, 2016; Krishnamurti, Shams, & Velayutham, 2018). We note that our description of CR is in
accordance with the risk-defining approach.
Kim and Wagner 5
Figure 2: Supply chain view of CR.
reactions from stakeholders, such as consumers and communities (i.e., incidents).

In this study, we regard trigger events as a source of CR, and investigation,
regulatory, and resolution as subsequent stages of CR.
Supply Chain View of CR

Corruption typically involves two parties: someone who offers a bribe/kickback
(briber) and someone who accepts it (bribee). Thus, a CR has a supply and de-
mand side (Getz, 2006). Ashforth et al. (2008, p. 676) noted that “the demand
side focuses on corrupt institutions and [buyers or] officials who, for instance, de-
mand bribes or other accommodations to conduct business transactions, whereas
the supply side focuses on those who respond to the demands and, thus, perpetuate
a corrupt system.” The authors further argued that, to better understand the nature
of corruption, we must consider both the supply- and demand-side corruption.
In addition to considering the supply- and demand-side of corruption, we in-
troduce a supply chain view of CR: corruption toward the upstream and the down-
stream side of target firms (see Figure 2). Because prior studies focus either on the
upstream or the downstream side, not both, they can only explain how involved
parties interact, and trigger corruption at either the supply-side (i.e., bribers) or
demand-side (i.e., bribees) of corruption. As noted earlier, many firms are caught
engaging in CRs both upstream (toward suppliers) and downstream (toward cus-
tomers) the supply chain. Therefore, taking a supply chain view of CR allows us
to compare how the position of the target firm impacts market value. More impor-
tantly, prior studies are limited in examining different types of CR in the supply
chain: upstream versus downstream. On the contrary, we set a target firm as the
focal firm in a supply chain, and then examine a CR occurring both upstream with
suppliers and downstream with customers. Hence, this supply chain view shifts
our focus of analysis to CRs that occur within the “simplified” supply chain (i.e.,
suppliers, focal firms, and customers; see Vachon & Klassen, 2006), with an eye
on both the supply- and demand-side of corruption. Focal firms can be either sup-
pliers or customers of the partners, depending on whether they are on the supply
or the demand side.
CR in the supply chain differs from ordinary supply chain risk for the follow-
ing two aspects. The first aspect concerns the sources of the risk. In short, supply
chain risks arise from operational failures or natural/manmade disasters, whereas
CRs in the supply chain occur when firms engage in illegitimate behavior that
may provoke negative stakeholder reactions when made public (Busse et al., 2016;
Kim et al., 2019). The second aspect concerns the nature of the risk. Supply chain
scholars have seen risk as either (1) both losses and gains, or (2) pure losses (Wag-
ner & Bode, 2009). In our view, supply chain risks connote primarily the pure
losses, whereas CRs entail the possibility of loss or gain. The rationale is that no
matter the reason, supply chain risks cause damage to firm value (Hendricks &
Singhal, 2003). On the other hand, CRs do not necessarily devastate firm value
(Anand, Ashforth, & Joshi, 2004; Pfarrer, Decelles, & Smith, 2008). Whether or
not CR damages target firms depends on situational factors, and on consequen-
tial stakeholder reactions. Therefore, for negative stakeholder reactions to occur,
it is necessary that stakeholders must notice the firm’s corrupt practices, judge the
situation as illegitimate, and then hold the target firm accountable for behaving
illegitimately. Consequently, a CR only manifests when stakeholders outside the
firm in the supply chain become aware of the scandalous issues, and get involved in
the incident stage (see Figure 1). Hereafter, unless otherwise indicated, we express
such stakeholders as observers.
Intensity, Reasons, and Consequences of CR in the Supply Chain

CR has gained great attention from supply chain practitioners. In a 2008 global
survey, for example, 61% of supply chain managers from 59 global firms rated
corruption as the second greatest risk to their business, after product safety (PwC,
2008). Interestingly, however, only a third of the respondents are confident in their
ability to manage CR. We found that this trend has remained unchanged. Accord-
ing to a recent global survey by EIU (2017), only 33% of the 100 respondents
said that they address corruption in their supply chains. Although firms recognize
the necessity for CR management within their supply chains, they have taken few
countermeasures in this direction.
Legitimate efforts are being made to fight corruption even beyond the own
firm boundaries. The U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act
are perhaps the most widely enforced anticorruption laws. Their main aim is to
make it an offense for firms and individuals to pay bribes to foreign officials in
an attempt to win contracts. In addition, as multistakeholder initiatives, the UNGC
adopted a 10th Principle against corruption in 2004, stating that businesses should
“work against corruption in all its forms, including extortion and bribery” (UNGC,
2016, p. 8). This initiative was established by the world’s largest group for corpo-
rate sustainability, ensuring the conduct of business with integrity within the global
supply chain.
Despite all such efforts, however, CRs still appear to run rampant in the global
supply chain. According to recent statistics, 82% of 545 senior executives, includ-
ing chief supply chain officers, reported to have experienced a corruption scandal
such as fraud and bribery in 2016, up from 61% in 2012 (Kroll, 2018). A more
severe problem is that these scandals may only be the tip of the iceberg (Rottig,
Koufteros, & Umphress, 2011; Jackson & Brammer, 2014). As noted by Arnold
et al. (2012, p. 136), “nearly 80% of all corrupt practices will never be discovered.”
The prevalence of corruption is even more dismaying, given the emphasis that is
Kim and Wagner 7
given to anticorruption initiatives within and beyond firm boundaries, such as in

the “Principles of the UN Global Compact” (UNGC, 2016).
Then why do firms (individuals in the firm) engage in corruption up- and
downstream their supply chains? Arguably, there are two major reasons. First, sup-
ply chain managers are responsible for the procurement of crucial materials and
services, which typically account for a large portion of corporate budgets, stimu-
lating corruption practices (Badenhorst, 1994). Second, these managers occupy a
boundary-spanning role in the supply chain, where they interact with other mem-
bers such as suppliers and customers (Wood, 1995; Carter, 2000). These managers
are thus in frequent contact with the outside environment, where they can deviate
from the policies and norms set by their own firm or home country. The deviation
from these norms and policies is less detectable, fostering engagement in illegiti-
mate behavior.
Many studies have also explored internal and external aspects of why firms
(individuals in the firm) behave illegitimately. For example, Mishina, Dykes,
Block, and Pollock (2010) found that performance with higher internal aspirations
and external expectations are associated with a greater likelihood of corporate ille-
gality (e.g., false claims). Bennett, Pierce, Snyder, and Toffel (2013) focused on the
dark side of competition among firms. Using secondary data sources, the authors
showed how competition encourages firms to engage in corrupt behavior. Finally,
Daboub, Rasheed, Priem, and Gray (1995) argued that corporate illegal activities
(i.e., illegitimate behavior) are more prevalent when firms grow and their structure
becomes more complex, which creates problems with coordination and communi-
cation. Taken together, we argue that the likelihood to engage in corrupt behavior
is higher for firms (individuals) when faced with a high-performance goal that has
to be met, particularly in a more competitive and complex supply chain.
As to the consequences of CR, we have seen no evidence of the market value
impact of CRs in the context of supply chains. This neglect is surprising given that
“shareholders are invariably the first victim” of CRs (Zahra, Priem, & Rasheed,
2005, p. 818), and that their values are considered “very good indicators of the
true performance of firms” (McWilliams & Siegel, 1997, p. 626). Yet, evidence
from other areas suggests a different story. As depicted in Table 1, several stud-
ies have shown that the stock market penalizes firms for CR-related issues. Using
meta-analysis of 27 studies, Frooman (1997) also revealed that shareholder wealth
is negatively affected when firms are found to have engaged in socially irrespon-
sible and illegal behavior. That said, all these studies focus on aspects other than
kickbacks and bribery in the supply chain (instead on aspects such as fraud, crime
or antitrust events). Also, none of the studies addresses corruption from a sustain-
ability risk perspective in a supply chain.
THEORY AND HYPOTHESES

CR Attributions
The term attribution is “the perception or inference of cause” (Kelley & Michela,
1980, p. 458). Attribution research is concerned with cause-and-effect relations:
“how people arrive at causal inferences, what sort of inferences they make, and
Table 1: Prior research on (U.S.) stock market reaction to CR-related events.

Study (year) Event Time n Relevant results
Strachan et al. (1983) Corporate crime na 84 CAR[–1, 0] = –1.33%

Davidson and Worrell Corporate na 131 CAR[–1, 0] = –1.08%
(1988) illegalities
Skantz et al. (1990) Illegal behavior na 41 CAR[–1, 0] = –1.85%
Karpoff and Lott (1993) Corporate fraud 1978–1987 132 CAR[–1, 0] = –1.58%
Davidson et al. (1994) Corporate 1965–1990 67 CAR[–1, 0] = –2.71%
illegalities
Reichert et al. (1996) Illegal business 1980–1990 83 CAR[–1, 0] = –1.91%
practices
Gunthorpe (1997) Unethical 1988–1992 69 CAR[–1, 0] = –1.95%
behavior
Alexander (1999) Corporate crime 1984–1990 60 CAR[–1, 0] = –2.26%
Karpoff et al. (1999) Procurement fraud 1983–1995 396 CAR[–1, 0] = –1.11%
Marciukaityte et al. Corporate fraud 1978–2001 276 CAR[–1, 0] = –5.01%
(2006)
Murphy et al. (2009) Corporate 1982–1996 394 CAR[–1, 0] = –1.40%
misconduct
Zeidan (2013) Illegal behavior 1990–2009 104 CAR[–1, 1] = –1.84%
Jory et al. (2015) Corporate 1993–2011 80 CAR[–1, 1] = –1.61%
scandals
Sampath et al. (2018) Corporate 1978–2010 306 CAR[0, 1] = –1.85%
misconduct
Note: CAR = cumulative abnormal return.
what the consequences of these inferences are” (Folkes, 1988, p. 548). Therefore,
the basic idea sheds light on the relationship between attitudes and behavior. This
study applies attribution theory to CR scandals in the supply chain. That is, we
examine how observers infer causes about outcomes of the target firm’s illegitimate
behavior, that is, observers’ attention to and interpretation of CRs.
Weiner (1985) advanced attribution theory by identifying dimensions related
to the perceived causes of success and failure. In this study, however, we focus
on Lange and Washburn’s (2012) attribution model that extends cause-and-effect
relations to a firm’s social irresponsibility (hereafter, “SiR”). Simply put, Lange
and Washburn (2012) conceptualize how an observer’s subjective understandings
of firm behavior can add up to their perceptions of the firm’s misdeeds. Three
properties that play a large role in the model are effect undesirability, corporate
culpability, and affected party noncomplicity, and they presumably influence each
other.
Effect undesirability refers to an observer’s perceptions that an undesirable
social effect is associated with the firm (i.e., actor). This assessment depends on
the observer’s threat avoidance, moral impulses, and norms for moral behavior.
When an observed social outcome is perceived as socially negative, the associated
firm will become the target of the observer’s attributional activity. This is referred
to as corporate culpability, which is assessed based on the observer’s inferences
of causality and judgments of moral responsibility. Finally, the third factor that
Kim and Wagner 9
underlies the firm’s SiR is affected party noncomplicity. That is, the observer is
more (less) likely to blame the target firm, when affected parties are perceived to
have less (more) control over the undesirable social effect.
CR Attributions as Signals of SiR

Signaling theory helps explain why investors pay attention to attributions of firm
CR. The core idea of this theory is that “some attribute of interest (e.g., firm qual-
ity) is not directly observable by other actors ex ante, and thus the firm needs to
figure out some way to communicate to its audience that it has this attribute by
sending particular signals” (Gomulya & Mishina, 2017, p. 556). Thus, receivers
like investors can never gain an accurate level of information about the attribute of
interest (in this study, firm CR), unless observing signals that the senders (target
firms) generate. In this sense, signaling theory deals with investor decision-making
under information asymmetry. The origin of signaling theory is sociology, elabo-
rated by Spence (1973). This concept has already been applied to business research
(for a review, see Connelly, Certo, Ireland, & Reutzel, 2011), including firms’ SiR
like CR (e.g., Marcus & Goodman, 1991).
In this study, we argue that CR attributions serve as signals of SiR to in-
vestors (or shareholders) of the target firm. That is, when a firm is caught engaging
in corrupt behavior, observers are likely to judge that this firm caused some so-
cial harm, and that the associated firm “has a moral responsibility and should be
held in contempt for the harm” (Lange & Washburn, 2012, p. 303). In fact many,
albeit not all (e.g., Zyglidopoulos, Hirsch, de Holan, & Phillips, 2017), scholars
view corruption as firms’ SiR. Thus, investors most likely perceive this signal as a
threat to the firm’s reputation, unless the firm offers a proper explanation about the
issue (i.e., CR-reducing signals) (Davidson & Worrell, 1988). Investors will then
interpret the negative signal as constraint on the firm’s current and future cash flow,
reacting to the attributions of the firm CR immediately (Fama, 1970). Hence, we
posit the following hypothesis:
H1: CRs in supply chains are associated with a negative stock market reaction.
As noted earlier, corporate illegalities like CR proceed through the follow-

ing sequence or process steps: trigger, investigation, regulatory, and resolution
(Karpoff et al., 2008; Sampath, Gardberg, & Rahman, 2018). Here, a trigger is
the first disclosure of a CR event, for example, self-disclosures of misdeeds or
whistleblower charges. When a CR comes to the fore, regulatory bodies perform
an (in)formal investigation. Following this, the regulators either drop the case or
continue the investigation. This is referred to as a regulatory event. Finally, when
the case is closed, a resolution occurs. In fact, this four-stage process is not uni-
versal. Many studies use a slightly varying framework (e.g., Skantz et al., 1990;
Pierce, 2018).
Given this process, we argue that at each stage of CR, observers hold different
attribution patterns that may affect investor behavior. The rationale is as follows.
Once sources of the CR become public, such a trigger event informs observers of
the potential for further investigation and criminal charges (Karpoff et al., 2008).
Results of the investigation may then suggest the potential for regulatory actions,
informing possible verdicts and penalties (Skantz et al., 1990; Reichert, Lockett,
& Rao, 1996). Consequently, at each stage of CR, observers tend to (partially) an-
ticipate the next step in the process and associated outcomes. They would be more
sensitive to initial CRs but relatively less to subsequent ones such as regulatory
and resolution. In this sense, investors may interpret the initial signal as a bigger
threat to the target firm, compared with those at later stages of CR. This reasoning
leads us to posit the following hypothesis:
H2: Most of the negative stock market reaction will be captured close to the onset
of CRs.
Upstream versus Downstream CRs

According to UNGC (2016), the very significant CRs in the supply chain are pro-
curement fraud perpetrated by suppliers, often involving governments. Using tar-
get firms as the focal firm in this study, this type of event (e.g., defense procure-
ment fraud) can be categorized as downstream CRs. Given that such scandals in-
volve public money, it is intuitive that firms involved in downstream CRs might
be severely criticized by observers. In an empirical setting, however, Karpoff, Lee,
and Vendrzyk (1999) showed that when the government as a client is the affected
party, major contractors (i.e., target firms) do not suffer a decline in stock prices.
Albeit including the government just as a complainant, not as those that actually
engage in contracting with the target firm, Alexander (1999) also found that the
negative stock price impact of such allegations is marginal. Murphy, Shrieves, and
Tibbs (2009) further support this finding.
To see why this is the case, we apply a principle of SiR attribution. Accord-
ing to Lange and Washburn (2012, p. 307), “attributions depend, in part, on an
affected party who is perceived as being low in complicity (or non-complicity) in
the negative outcome.” That is, if the affected party is found to have more control
over the CR scandal, they should be more to blame and thus are more likely to be
criticized by observers. Because this study takes target firms as focal firms in the
supply chain view of CR, the affected parties can be suppliers for upstream CR,
or customers for downstream CR (see Figure 2). Further, we assume that a firm’s
CR is a socially negative effect (i.e., effect undesirability), and thus deserves to be
regarded as culpable (i.e., corporate culpability). Thus, where CR attributions are
more likely to occur within the supply chain should depend on whether the affected
party is perceived to be high or low in complicity.
According to the notion of affected party noncomplicity, two perceived char-
acteristics are crucial: power and foresight (Shaver, 1985; Lange & Washburn,
2012). Simply put, if the affected party is more in control of the CR scandal (i.e.,
higher power) with foresight on its negative effect (i.e., full complicity), that party
is more likely to be perceived as a powerful victim. In contrast, if this party is
found to be unable to avoid the CR scandal (i.e., lower power) without foresight
of its consequences (i.e., noncomplicity), it is more likely to be perceived as an
innocent victim. In this sense, the two perceived characteristics for affected party
noncomplicity determine whether the affected party is thought to be in control of
the negative effect or not.
Kim and Wagner 11
Given that a firm’s CR is perceived as SiR (Davidson & Worrell, 1988), both
suppliers and customers are perceived as having full knowledge of its negative ef-
fect. However, the degree to which they are found to be in control of the scandal
may differ. In the context of supply chains, customers generally exert power over
their suppliers (Wagner et al., 2011; Touboulic, Chicksand, & Walker, 2014; Chae,
Choi, & Hur, 2017). This suggests that, with the full knowledge about CR effects,
customers might have tried to prevent the negative consequences, whereas it is not
the case for suppliers. In this circumstance, observers will attribute less respon-
sibility to the suppliers for upstream CRs, as they may see focal firms as more
powerful, or fully complicit. However, focal firms may be seen as less powerful
for downstream CRs, because they, as suppliers, could have had less control over
the negative effect caused by CRs. Thus, investors may interpret this signal as a
greater threat to the powerful victim (i.e., the focal firm in upstream CRs); yet, they
may take a CR event less seriously for the innocent victim (i.e., the focal firm in
downstream CRs). Hence, we posit the following hypothesis:
H3: Upstream CRs are associated with a more negative stock market reaction
than downstream CRs.
METHODOLOGY
Data Description
We compiled the data set of CR announcements via the ABI/INFORM Collection,
a business database that contains the full text of the most widely read news publica-
tions. Following prior studies (e.g., Davidson, Worrell, & Lee, 1994; Murphy et al.,
2009), we chose the WSJ as our search source of CR events that were announced
during 1984–2014. The WSJ is the largest business newspaper in the United States,
and is therefore influential in shaping investors’ perceptions. We also note that the
WSJ database is available from 1984 onward. Our search terms consisted of com-
binations of the following supply chain- and CR-related keywords: buyer, supplier,
contractor, vendor, supply, chain, bribe*, kickback, fraud, corrupt*, and other rel-
evant terms.
Our study focus is to measure the stock price effect of a target firm’s CR
in the context of supply chains. To ensure this criterion, we searched the WSJ
news articles based on using the supply chain-related keywords as necessary con-
ditions of CRs (e.g., “supply/chain” AND “corrupt*” OR “bribe*”).3 For a CR
event to be included in our final sample, we applied the following additional cri-
teria: (1) the target firms must be publicly traded on U.S. exchanges including
NYSE, AMEX, and NASDAQ; (2) the firms’ stock price data must be available on
the Center for Research in Security Prices; and (3) the CR event must be isolated
from the effects of potentially confounding events, such as mergers and acquisi-
tions (M&A). Finally, to ensure that we did not miss any relevant WSJ articles, we
followed an iterative process of checking all announcements for each sample firm.
3In this stage, we only considered WSJ news articles in which a target firm(s) is clearly mentioned (e.g., see
example articles in Appendix A).
These criteria left us with a final sample of 315 CR events, collected from 285 WSJ
announcements.
A content analysis was performed to categorize each news article in terms of
upstream versus downstream CR. One commonly used method is the percentage of
agreement between the pair of coders. However, the results from such a descriptive
approach are often not regarded as a rigorous indicator of reliability (Krippendorff,
2004). Thus, following common practice, we assessed interjudge reliability using a
statistical technique: Cohen’s kappa (Cohen, 1960). Two independent coders were
involved to analyze the 315 articles. In case of noncongruent opinions, the coders
jointly assessed a news article. The interjudge reliability was .91, close to a perfect
agreement level.
As noted earlier, corporate illegalities like CR are not a time-discrete event.
Rather, they are a prolonged process. To reflect this, we built on Karpoff et al.’s
(2008) framework, and categorized our sample into the following stages of CR:
trigger, investigation, regulatory, and resolution. Our sample involves 114 trigger,
29 investigation, 77 regulatory, and 30 resolution events (see also Table 5). CR
events that fell into none of these categories, such as firms’ remedy efforts (Alexan-
der, 1999; Pierce, 2018) and bidding/payments suspended (Karpoff et al., 1999),
were labeled “other.” Likewise, the result of assessing reliability for the stage of
CR was .92, which is considered as an excellent level of interjudge agreement.
Examples of CR announcements included in our sample are “BHP Billiton
discloses SEC request” (April 21, 2010), “U.S. opens Alcoa bribery probe” (March
21, 2008), “Sales representative admits to kickbacks to J.C. Penney buyer” (June
13, 1995), and “Glaxo fined $500 million by China” (September 20, 2014). As
illustrated by the examples, our sample follows the predefined sequence of CR
stages ranging from trigger (e.g., BHP) to investigation (e.g., Alcoa), regulatory
(e.g., J.C. Penney), and to resolution (e.g., Glaxo) events. In our sample, many of
the events occurred downstream a supply chain. This can be explained as down-
stream CRs often involve public money and thus attract more attention from the
media. Note that we only included CR events in which the government acts as a
customer of goods or services, which is a common type of corruption in a sup-
ply chain (UNGC, 2016). In robustness checks, however, we will scrutinize if our
results are driven by such government-related CRs.
Finally, we grouped our sample into five industry sectors based on two-digit
standard industrial classification (SIC) codes. Manufacturing (SIC 20–39) is the
major industry sector with 169 events, followed by mining and construction (SIC
10–17; n = 58), services (SIC 60–89; n = 40), wholesale and retail trade (SIC
50–59; n = 38), and transportation and public utilities (SIC 40–49; n = 10). In
nontabulated results, we reveal that the number of CR events continues to fluctuate
until the last year observed, suggesting no clear trend over time.
Data Analysis
This study analyzes the overall stock price effects of CR (H1), those at each stage of
CR (H2), and those of CR events up- and downstream the supply chain (H3). To test
our hypotheses, we apply an event study. This kind of analysis is most appropriate
for estimating the performance impact associated with firms’ CR to avoid social
Kim and Wagner 13
desirability bias (e.g., Kim, Colicchia, & Menachof, 2018; Pierce, 2018; Sampath
et al., 2018). In principle, the event study methodology is based on the efficient
market hypothesis, assuming that the stock price of a firm instantaneously reflects
all publicly available information (Fama, 1970). Hence, this method allows us to
meet the study’s objective, that is estimating changes in stock prices associated
with CRs.
The stock price effect is typically measured by abnormal returns (ARs). Fol-
lowing common practice (e.g., Brown & Warner, 1985), we estimate ARs using
the market model:
Rit = αi + βi Rmt + εit ,
where Rit is the observed stock return of firm i on day t, Rmt is the return of the
market index (S&P 500) on day t, αi is the intercept term, βi is the systematic risk
of stock i, and εit is the error term. The AR is computed as the difference between
the actual and the expected return:

ARit = Rit − α̂i + β̂i Rmt ,
where we estimate the parameters of the market model, α̂i and β̂i , using an ordinary
least squares regression over the 200-day estimation period (i.e., days –210 to –11,
with the event being day 0) (Hendricks & Singhal, 2003). To capture the cumula-
tive effect for a given time period [t1 ,…, t2 ], we aggregate the ARs for each event
observation as cumulative ARs (hereafter, CARs), using the following formula:

t2
CARi[t1 ,t2 ] = ARit .
t=t1
Calculating CARs is sensitive to design issues (McWilliams & Siegel, 1997).

Based on recommendations by McWilliams, Siegel, and Teoh (1999), we address
the following dimensions to ensure that our results are valid: sample size, length
of the event window, confounding events, and outliers.
First, we use a wide range of search keywords to collect a sufficiently large
sample. Our sample size (n = 315) is much larger than what is considered a small
sample for event study research (between 5 and 20; see Brown & Warner, 1985).
Our sample is comparable to those used in other published event studies (Table 1).
Second, with respect to the event window choice, scholars argue that if the news
items are from print media like WSJ, information about the CR story may have
been leaked to the market a day earlier (e.g., Davidson & Worrell, 1988; MacKin-
lay, 1997). For example, a whistleblower can report a corruption case to the press,
and then relieve the information outside before the news is printed on the next
day. Thus, following common practice, we define a 2-day interval (i.e., day –1
and day 0) as an appropriate event window. To ensure that our results are robust,
we also examine alternative intervals that have been used in some recent CR-
related event studies (i.e., day 1). Third, to account for confounding effects, we
searched the WSJ news items for any reports potentially economically relevant to
our sample firms (e.g., earnings announcements, M&A announcements, new prod-
uct announcements) during the event window. Therefore, we eliminated any CR
events that were made concurrently with those events. Fourth, we address outlier
Table 2: Descriptive statistics and correlation matrix.

Variable Mean SD 1 2 3 4
1. CAR [–1, 0] –0.006 0.030

2. Upstream CR 0.223 0.417 –0.087
3. Firm size 10.315 1.334 0.034 0.120*
4. Growth prospect 3.646 2.805 0.017 –0.254** 0.061
5. Prior performance 0.051 0.071 0.066 0.109 0.216** 0.347**
Note: n = 310.
∗
p < .05.
∗∗
p < .01.
concerns by reporting nonparametric test statistics, such as the Wilcoxon signed-

rank Z-statistic (McWilliams & Siegel, 1997).
As a robustness check for H2 and H3, we estimate the following regression
model separately for each stage of CR:

8
CARi = β0 + β1 Upstream CRi + β2,k Xk,i + εi ,
k=1
where CARi is the dependent variable, measured as cumulative AR for firm i over
the 2-day event window; Upstream CRi is a binary variable with a value of 1 if the
CR event occurs upstream with suppliers and 0 otherwise (i.e., downstream CR);
Xk,i includes the industry- and firm-level control variables noted below, which may
be associated with stock market reactions to CRs; and εi is the error term.
In this model, we use a set of dummy variables to account for potential indus-
try effects (two-digit SIC level). Furthermore, following Murphy et al. (2009), we
control for firm size (the natural logarithm of total assets) and growth prospect (the
market-to-book ratio), as both are known to be associated with stock price returns
(Fama & French, 1993). Following prior studies (e.g., Pierce, 2018), we further
include a firm’s prior performance as a firm-level control, which was measured by
return on assets. Data for these controls were obtained from Compustat, based on
the most recent fiscal year-end preceding the CR announcement. Table 2 provides
descriptive statistics and correlations for the variables used in this study. Note that
we could not obtain firm size, growth prospect and/or prior performance controls
for five firms, which reduces our sample size to n = 310 for the regression analysis.
EMPIRICAL RESULTS
Results for Hypothesis 1
Our results show that, on average, a firm’s CR generates a negative market reaction
around the event date (Table 3). The market reaction is negative and significant on
the day of the announcement (day 0), but not on the day before the announcement
(day –1). The mean and median CAR over the event window are –0.56% and –
0.29%, respectively, both of which are statistically significant at the 1% level. On
the other hand, the mean and median CAR for all other intervals are small and
Kim and Wagner 15
Table 3: Estimating CAR for CRs.

Event day [t] Mean (%) Median (%) % Negative
Prior day [–1] –0.17 (–1.62) 0.06 (–1.01) 49.52 (0.41)

Event day [0] –0.39** (–3.19) –0.19** (–2.98) 56.83* (–2.18)
Event window [–1, 0] –0.56*** (–3.35) –0.29** (–2.83) 54.29 (–1.28)
Alternative [1] 0.13 (1.46) 0.14 (1.22) 47.94 (0.97)
Alternative [–1, 1] –0.43* (–2.45) –0.31* (–2.51) 55.56+ (–1.73)
Alternative [0, 1] –0.26+ (–1.81) –0.14+ (–1.88) 54.29 (–1.28)
Note: n = 315; t-statistics for means, Wilcoxon signed-rank Z-statistics for medians and
generalized sign Z-statistics for % negatives are reported in parentheses.
+
p < .10.
∗
p < .05.
∗∗
p < .01.
∗∗∗
p < .001.
Table 4: CAR [–1, 0] for alternative models.

Alternative
model n Mean (%) Median (%) % Negative
Mean-adjusted 315 –0.44* (–2.37) –0.17 (–1.60) 52.06 (–0.81)

Market-adjusted 315 –0.51** (–3.11) –0.29** (–2.86) 55.24+ (–1.66)
FF three-factor 315 –0.54*** (–3.36) –0.21** (–2.73) 53.97 (–1.11)
FF four-factor 315 –0.53*** (–3.42) –0.25** (–2.81) 54.92 (–1.41)
generalized sign Z-statistics for % negatives are reported in parentheses.
+
p < .10.
∗
p < .05.
∗∗
p < .01.
∗∗∗
p < .001.
only marginally significant. The percentage of negative CARs is only significant

on the announcement day (56.83%). Taken together, this evidence provides strong
support for H1.
For our main analysis, we used the market model to estimate CARs. To as-
sess the sensitivity of our results to this model choice, we reestimate CARs using
four alternative models: mean-adjusted, market-adjusted, FF (Fama-French) three-
factor, and FF four-factor models. Unlike the market model, the mean-adjusted
(market-adjusted) model uses the stock’s average return (the market return) as the
benchmark over the 200-day estimation period (for details, see Brown & Warner,
1985). In addition to the market factor, the FF three-factor model includes the size
and the book-to-market factor, whereas the FF four-factor model extends the FF
three-factor model by the addition of the momentum factor (for details, see Fama
& French, 1993; Carhart, 1997). As Table 4 shows, our results are robust to all
these alternative models.
Furthermore, our sample includes few CR events that involve multiple tar-
get firms (n = 35). For example, it is not unusual for regulatory bodies to
look into a specific industry, or a situation, and to investigate multiple firms
Table 5: CAR [–1, 0] by stage of CR.

n Mean (%) Median (%) % Negative
Trigger 114 –0.90** (–3.04) –0.42** (–2.65) 61.40* (–2.25)

Investigation 29 –1.14+ (–1.81) –0.43+ (–1.68) 58.62 (–0.86)
Regulatory 77 –0.02 (–0.05) 0.14 (–0.10) 45.45 (0.93)
Resolution 30 –0.24 (–0.43) 0.56 (0.77) 36.67 (1.46)
Other 65 –0.48+ (–1.71) –0.50+ (–1.87) 58.46 (–1.28)
generalized
+
sign Z-statistics for % negatives are reported in parentheses.
p < .10.
∗
p < .05.
∗∗
p < .01.
allegedly involved in possible corruption practices. This type of collective event

may influence the event study results (Kim et al., 2019). Thus, we reestimate
the 2-day CAR excluding such cases. In nontabulated results, we reveal a mean
(median) CAR of –0.61% (–0.31%), which is very similar to our main findings.
Moreover, we test whether the market behavior in response to CR changes over
time. To this end, we categorize our sample into three periods: 1984–1993, 1994–
2003, and 2004–2014. In nontabulated results, we find similar mean (median)
CARs for each group. This suggests that time-specific effects do not drive our
results.
Results for Hypotheses 2 and 3

Table 5 presents market reactions by the CR stage for H2. As expected, the stock
market reacts most negatively to trigger (–0.90%) and investigation (–1.14%)
events. The negative impact by investigation is only marginally significant (p <
.10). Overall, these results suggest that the shareholder wealth effects of CRs
are largely driven by initial events (i.e., trigger or to a lesser extent investigation
events), and less by subsequent events such as regulatory and resolution. Thus,
we find support for H2.
To provide additional insights, we examine the postannouncement effects
of CR. To this end, we follow prior studies (Barber & Lyon, 1997; Hendricks &
Singhal, 2003), and estimate buy-and-hold ARs (BHARs) over the next 3 months
(approximately 60 trading days). Accordingly, we construct a matched portfolio of
control firms on the basis of size (market value of equity) and book-to-market ratio.
As shown in Table 6, using trigger events only, the mean and median BHARs over
the 3-month postannouncement period are statistically insignificant. In our sample,
the average time required to close a CR case (i.e., from trigger to resolution) is
about 3 years. Thus, we reestimate the BHAR over a longer period: 6, 12, 24, and
36 months. We find no significant BHARs for the longer time period. This result
provides evidence that the market is sensitive to CRs mostly around the event date,
which is consistent with our findings shown in Table 5.4
4 Yet, firms in the supply chain should still be concerned with trigger CR, as this initial effect likely de-
termines the level of difficulty for a target firm to recover from the event (Karpoff, Lee, & Martin, 2008;
Kim and Wagner 17
Table 6: BHAR for the postannouncement effects of CR.

Time window
(month) Mean (%) Median (%) % Negative
3 –0.21 (–0.17) 0.11 (–0.38) 48.62 (0.28)

6 2.18 (1.33) –1.20 (0.82) 52.29 (–0.48)
12 4.21 (1.51) 4.04 (1.34) 44.04 (1.24)
24 5.31 (1.19) –0.79 (0.08) 50.46 (–0.10)
36 –0.92 (–0.18) –9.56 (–0.54) 56.07 (–1.05)
Note: n = 114 (trigger CRs); t-statistics for means, Wilcoxon signed-rank Z-statistics for
medians and generalized sign Z-statistics for % negatives are reported in parentheses.
Table 7: Differential effects (CAR –1, 0) of upstream versus downstream CRs

(%).
Upstream Downstream Difference
n Mean Median n Mean Median Mean Median
All events 69 –1.04* –0.64* 246 –0.42* –0.24* –0.62 –0.40

Trigger 33 –1.98** –1.46** 81 –0.46 –0.28 –1.52* –1.18*
Investigation 2 –4.14 –4.14 27 –0.92 –0.43 –3.22 –3.71
Regulatory 20 –0.04 –0.01 57 –0.01 0.17 –0.03 –0.18
Resolution 6 0.48 0.66 24 –0.42 0.56 0.90 0.10
Other 8 –0.02 0.30 57 –0.55* –0.58* 0.56 0.88
Note: n = 315; t-statistics for means and its comparison, Wilcoxon signed-rank Z-statistics
for medians, and Mann-Whitney Z-statistics for median comparison are reported.
∗
p < .05.
∗∗
p < .01.
To test H3, we split our sample in upstream versus downstream CR events.

Table 7 shows that upstream CRs have a mean (median) CAR of –1.04% (–0.64%),
and that downstream CRs are associated with a mean (median) CAR of –0.42%
(–0.24%). However, a t-test (Mann-Whitney Z-test) for the difference in the means
(medians) of market reactions suggests insignificance. To further examine this, we
reestimate its differential impacts based on the stage of CR events. We find that
market reaction to upstream versus downstream CRs is only statistically different
for trigger events. We do not find significant differences in subsequent CR events.
Taken together, this evidence provides partial support for H3.
Table 7 further shows the market reaction to the downstream CR events allo-
cated in the “other” basket (which is not the main focus of this study) to be signif-
icantly positive. When firms are accused of corrupt practices, they respond to CR
allegations (Alexander, 1999; Pierce, 2018). Also, during the four-stage sequence,
there is the potential for some unexpected events to occur, like bidding suspended
(Karpoff et al., 1999). “Remedy efforts” (n = 20) and “client pressure” (n = 19)
Sampath, Gardberg, & Rahman, 2018). To regain legitimacy, target firms must address stakeholder demands
that vary across the stages of CR (trigger, investigation, regulatory, and resolution) (Pfarrer, Decelles, Smith,
& Taylor, 2008). Failure to do so would only cause additional market penalties that are imposed by negative
stakeholder (observer) reactions.
are two major subtypes of the downstream–other CR cases. Our (nontabulated) test
for the subgroups shows a mean (median) CAR of –0.09% (0.39%) and –0.69%
(–0.80%), respectively. Yet, none of the market reactions is statistically significant,
except for the median CAR for client pressure (p < .05). This indicates that unex-
pected client pressure (e.g., suspended payments) might drive the observed market
penalties of the downstream–other cases.
Because our sample includes government-related CRs as a common type of
corruption in the supply chain (UNGC, 2016), we conduct a robustness check to
assess the sensitivity of the market reaction to such events. In our sample, not
all downstream CRs are associated with government contracts, but some are with
private contracts (e.g., foreign firms). Thus, we split our downstream sample into
the two groups: “government-contract” (n = 198) and “private-contract” (n = 48)
CRs. In nontabulated results, we reveal that for government-contract CRs, the mean
CAR is –0.48%, which is not significantly different from that (–0.19%) of private-
contract ones. This insignificance is also the case for the median CAR, and for an
additional subgrouping: trigger versus rest-of-CRs. This suggests that our results
are most likely not driven by government-related CR events, but by the attribution
characteristics power and foresight.
Scrutinizing the impact of the position variable (i.e., upstream vs. down-
stream CR), also separate for each stage of CR, augments the findings for H2 and
H3. As shown in Table 8, regression analysis reveals an overall significant stock
price impact of upstream CR (with a coefficient of –0.132, p < .05). The analysis
by the stage of CR shows that the position variable is significantly related to trigger
events (with a coefficient of –0.249, p < .01), but not to investigation, regulatory,
and resolution events. Hence, we see a more negative impact of the upstream posi-
tion on the 2-day CAR (as proposed by H3), and this occurs at the onset (trigger)
stage (as proposed by H2). Overall, these findings provide robustness for our re-
sults. As a final check for the robustness and as an expansion of our main results
concerning H2 and H3, we perform a regression analysis with the stage of CR as an
ordinal variable (Table B1) and with CR stage intercepts (Table B2). These results
are summarized in Appendix B and are reassuring.
DISCUSSION
Based on a sample of 315 events, this study sheds light on the stock price effect
of CR in the supply chain. Specifically, we find significant market penalties for
allegations of the target firms’ CRs (triggers) and its subsequent issues. Yet, most of
the negative market reaction is driven by initial CRs, but not by the subsequent ones
such as regulatory and resolution. Furthermore, we find greater market penalties for
CRs that occur upstream with suppliers (i.e., upstream CR), than CRs that occur
downstream with customers (i.e., downstream CR). In what follows, we discuss
several notable observations, including their implications for theory and practice.
First, CRs in supply chains are associated with a significant reduction in
shareholder wealth of the target (focal) firms. We argued that investors perceive CR
attributions as signals of SiR, and thus as a threat to the target firm’s reputation. Al-
beit different in many respects, this is consistent with findings of prior studies (see
Table 1), which all demonstrate a negative market reaction to CR-related events.
Kim and Wagner 19
Table 8: Regression estimation of CAR [–1, 0].

Variable entered Trigger Investigation Regulatory Resolution All events
Intercept –0.021 0.019 –0.006 0.001 –0.012

(–1.011) (0.207) (–0.200) (0.020) (–0.919)
Upstream CR –0.249** –0.476 –0.018 0.250 –0.132*
(–2.646) (–1.114) (–0.129) (1.086) (–2.150)
Mining & 0.089 0.821 0.107 –0.175 0.136+
a
construction (0.824) (0.891) (0.744) (–0.814) (1.950)
Transportation & 0.136 0.291 –0.054 0.059
a
public utilities (1.467) (0.828) (–0.438) (1.008)
a
Wholesale & retail 0.110 0.202 –0.018 –0.221 0.012
(1.166) (0.461) (–0.142) (–0.982) (0.195)
–0.186+
a
Services 0.566 0.124 0.268 0.014
(–1.874) (1.227) (0.946) (1.254) (0.229)
Firm size 0.041 –0.277 0.024 –0.004 0.024
(0.448) (–0.633) (0.191) (–0.019) (0.401)
Growth prospect –0.043 –0.018 –0.094 –0.180 –0.068
(–0.392) (–0.056) (–0.644) (–0.761) (–1.030)
Prior performance 0.269* 0.787 0.055 0.101 0.160*
(2.174) (0.806) (0.355) (0.431) (2.142)
N 109 29 77 30 310
F for the model 3.074** 0.431 0.235 0.525 1.182
R2 (%) 19.74 14.72 2.69 14.32 3.05
Adjusted R2 (%) 13.32 –19.39 –8.76 –12.95 0.47
Note:
a
n = 310; standardized coefficients are reported with t-statistics in parentheses.
Base category is manufacturing.
∗
p < .05.
∗∗
p < .01.
Compared with prior studies, yet, the magnitude of losses found in this study is
somewhat smaller. This might be because, as discussed earlier, our study is differ-
ent from the prior studies in that the focus of this study is mainly bribery/kickbacks,
and that our sample characteristics include both upstream and downstream CRs
(i.e., supply chain). That said, looking at upstream CR with trigger events only, the
market penalties are stronger and comparable with prior findings in magnitude.
Second, the stock price effect of CR is mostly driven by initial events, not by
subsequent ones. We find only trigger events to diminish shareholder wealth, which
is somewhat consistent with prior findings (Karpoff & Lott, 1993; Karpoff et al.,
2008; Sampath et al., 2018). As noted, observers can predict a subsequent stage of
CR at the beginning; therefore, attributions become less and later disappear as they
move away from the time triggered by the media. This does not serve as a crucial
signal to the investors, eliciting weaker (or no) market reactions against subsequent
CRs. We further support this finding with an analysis of BHARs over the next
36 months, showing that most of the wealth effects of CRs are captured close to
the initial event. Consequently, unless something unanticipated happens, the stock
market is sensitive mostly to initial CRs, and seems to anticipate its subsequent
ones at the time of trigger events.
Third, albeit only for trigger events, there is a significant difference in the
stock market reaction between upstream and downstream CRs. This provides a
unique test of Lange and Washburn’s (2012) model, stating that CR attributions
are likely to vary depending on the affected party noncomplicity. As noted ear-
lier, few studies have shown nontheory-based findings somewhat similar to our
study (Alexander, 1999; Karpoff et al., 1999; Murphy et al., 2009). However, our
study differs from the earlier studies in several aspects. First, we focus on corrup-
tion from a sustainability risk perspective (i.e., CR), and the prior studies concen-
trate on “fraud” (Karpoff et al., 1999), or general corporate “crime” like antitrust
(Alexander, 1999; Murphy et al., 2009). Second, we take a supply chain focused
typology, namely upstream (with suppliers) versus downstream (with customers)
CR, not like “related-party” (e.g., suppliers, customers, etc.) versus “third-party”
(those that do not actually engage in contracting with the target firms) fraud/crime.
Importantly, unlike the prior studies, we only consider contract-based CRs.
Contribution to Theory
Many scholars have provided evidence on the stock price effect of corruption-
related issues under the name of “reputational penalties” (e.g., Karpoff & Lott,
1993; Alexander, 1999; Murphy et al., 2009). In the context of supply chain, this
study is the first to integrate multiple theories to better explain why and how fo-
cal firms pay the reputational penalties. Few attempts have been made to explain
such a complex issue by drawing especially from agency theory (Arnold et al.,
2012; Pierce, 2018). In our view, agency theory provides a powerful explanation
for why corporate crime becomes more likely. But this view alone is not sufficient
to explain why and how the crime actually elicits negative market reactions. Repu-
tational penalties imposed by CR-related scandals often refer to the expected firm
value losses that exceed direct legal penalties (Karpoff et al., 2008). In this study,
we explain why observers perceive a firm’s CR as signals of SiR, and how such
negative signals trigger the market to penalize the target firm.
CR is not a new idea in the literature (e.g., Hansen, 2011; Fazekas, Toth, &
King, 2016; UNGC, 2016; Krishnamurti, Shams, & Velayutham, 2018). Yet, the
extant approach lacks conceptual clarity on the meaning of CR, thereby limiting the
development of significant theory (Wacker, 2004). Further, the earlier studies are
limited in explaining when and how a CR causes damage to a target firm, making it
difficult to measure the true economic impact of CR (McWilliams & Siegel, 1997).
In this study, building on the notion of sustainability risk, we extend the current
literature by specifying a CR path (Figure 1).
In reality, corruption consists of a sequence of events. As noted by Pierce
(2018), however, most of the previous studies in this field are based on two general
events: allegations and convictions. To better explain the effect of CR on firm
value, this study stratified our sample based on the typical sequence of CR (i.e.,
trigger, investigation, regulatory, and resolution) (Karpoff et al., 2008; Sampath
et al., 2018). In this study, we found that the stock market captures most of the
stock price effects of CR at the time of initial events. This evidence is consistent
with our premise that unanticipated signals about CRs were conveyed to investors
before subsequent events occur. Overall, our work supplements the new stream
Kim and Wagner 21
of corruption research that has moved the focus of analysis from the simple
dichotomy to a more detailed sequence of CR stages.
To our knowledge, extant research has yet to provide evidence on the stock
price effect of CR from an upstream versus downstream point of view (i.e., sup-
ply chain). As noted earlier, this neglect is surprising, given that we are all now
chronically aware of firms’ corrupt practices occurring both up- and downstream a
supply chain. By dividing our sample based on the supply chain position, we pro-
vide an initial analysis of differential stock price impact of CR. Particularly, this
study augments Lange and Washburn’s (2012) attribution model, explaining why
the magnitude of market penalties associated with CR varies between upstream and
downstream CRs. The contingency of supply chain position is a common topic in
recent supply chain research (e.g., Narasimhan, Schoenherr, Jacobs, & Kim, 2015;
Schmidt, Foerstl, & Schaltenbrand, 2017). Yet, this topic is neglected in the cor-
ruption context, something that we address in this study.
Finally, the findings of this study contribute to an ongoing stream of research
in the field of supply chain. Recently, scholars have argued that customers might
be held accountable and punished even for its suppliers’ misconduct, in what is
better known as “chain liability” (Hartmann & Moeller, 2014; Busse et al., 2016;
Reinerth, Busse, & Wagner, 2019). Indeed, using an econometric approach, Kim
et al. (2019) found that the chain liability effects are detrimental to customers, with
greater reputational risks of dampening firm market value. In this study, we extend
the prior discourse by delving more into why chain liability occurs for focal buying
firms. Specifically, by building on the notion of affected party noncomplicity, we
elucidate how the two characteristics, power and foresight, can determine the firms’
chain liability in supply chains.
Managerial Implications
Consequences of the concerned CR include the damage to the target firm’s reputa-
tion and its penalties. To verify its economic significance, we calculate the dollar
losses caused by the CR. For all our 315 CR events, the mean (median) change
in market value is –$355.8M (–$159.8M). Focusing on the stage of CR, the mean
(median) change for the trigger is –$586.1M (–$295.1M), whereas that for the in-
vestigation is –$860.2M (–$492.4M). Furthermore, in our calculation, the mean
(median) changes for upstream and downstream CR are –$795.2M (–$507.3M)
and –$251.0M (–$85.7M), respectively. Finally, we found that the mean (median)
change for upstream–trigger CR is greatest, with the decline in market value of
–$1,468.4M (–$666.9M). Clearly, CRs in the supply chain, particularly those that
occur initially in the upstream side, have significant negative impacts on target
firms’ shareholder wealth.
To provide further insights into the stock price impact associated with CRs,
we compare the reputational penalties with potential legal penalties (Karpoff &
Lott, 1993; Murphy et al., 2009). In our sample, we were able to observe 34 events
(26 firms) that reported money for a settlement or potential fines. The mean (me-
dian) amount of those legal costs is $161.8M ($197.1M). In contrast, we found that
the mean (median) loss in market value for the 34 events is $495.7M ($209.7M),
which is a significantly greater penalty (but not for median value) than those at
the time of resolution events. Therefore, managers should not underestimate such
hidden costs imposed by CR. Earlier, we discussed that firms (individuals in the
firms) engage in misconduct when faced with a high-performance goal in a com-
petitive and complex supply chain. Supply chain managers need to be mindful of
the consequences that result not only from the potential legal costs, but also those
that come from ignoring the reputational penalties.
Consequently, CRs in the supply chain should be preventive. The prevention
of CR could be achieved via collective action—structured cooperation among all
members of the supply chain (UNGC, 2016). For the action to be effective, yet,
each firm should make an effort to prevent CR in its own business. According to
Anand et al. (2004), firms can enhance the prevention of CR by (a) fostering aware-
ness among employees (i.e., training), (b) asking for the achievement of realistic
performance goals and for goals that are balanced (e.g., quantitative and qualita-
tive goals), (c) nurturing an ethical climate in the firm, and (d) top management
that serves as ethical role models. After having established the foundation of an-
ticorruption efforts at the individual firm level, it is important for each firm (a)
to cooperate with supplier firms, (b) to educate/train suppliers, (c) to respond to
the supplier’s objections, and (d) to take a holistic approach towards supply chain
management (for details, see UNGC, 2016).
Our results provide a better understanding of the consequences of CR that
would make firms more motivated to participate in such a cooperative approach.
Still, it is also likely that members of the supply chain may face challenges in
pursuing the costly efforts, and this might make the collective action less effective.
Further, as echoed by Anand et al. (2004), CR is accepted as common, taking place
at every business (see also Ashforth et al., 2008). Thus, it would be impossible for
firms to fully avoid CRs in the supply chain. Then, the focus turns to issues of how
to respond before such economically devastating events damage a target firm’s
value.
During a business scandal like CR, one typical way of defending reputational
standing is to respond to observers’ criticism. Many scholars propose two conflict-
ing response strategies that a target firm could take: assertive versus defensive (e.g.,
Marcus & Goodman, 1991). Simply put, the former refers to a target firm’s will-
ingness to accept responsibility, whereas the latter is the opposite, that is, denying
responsibility. In the crisis management literature, the current consensus is that
a scandalous event with higher attributions of responsibility should be matched
with an assertive strategy. In contrast, any scandals with lower attributions of re-
sponsibility should be matched with defensive strategies (Coombs, 1995; Bundy
& Pfarrer, 2015).
Therefore, we suggest that for upstream CRs, focal firms respond to ob-
server criticism by taking more assertive response strategies. On the contrary, when
caught in CR with downstream customers, focal firms need to take a more defen-
sive strategy. This is simply because, for upstream CRs, focal firms are perceived
by observers as a more powerful victim (higher CR attributions), whereas they are
seen as more innocent (lower CR attributions) for downstream CRs. Our empir-
ical findings support this statement. Yet, such a response strategy might be best
matched at the onset of CR, that is, trigger. That is, at the later stages of CR, target
Kim and Wagner 23
focal firms should be adaptable to situational change as something unexpected can

always happen.
Limitations and Future Research

This study, like any other, needs to be considered in light of its limitations. First,
our data set is based on the U.S. market. This study selected the United States
as a study context because it has the top global brands, which are often caught
in CR scandals. But then again, this focus on a single country raises the need for
replication across other countries. We especially encourage studies that investigate
this aspect of CR in emerging markets, where the perception of CR-related issues
is different (Kroll, 2010, 2018; Krammer, 2019).
Second, our work utilizes a sample of CR events comparable in size to studies
not taking a supply chain perspective (see Table 1). Yet, another limitation might
relate to the imbalanced data set for upstream versus downstream CRs. However,
we found no significant difference in stock market reaction between “government-
contract” and “private-contract” downstream CRs. This means that our event study
results are most likely not driven by the characteristics of our data, but instead
by those of attribution (power and foresight) we discussed earlier. Nevertheless,
the replication of our study with an even larger and more balanced sample would
enhance the generalizability of the results found in this study.
Third, in this study, one premise is that customers are more powerful than
their suppliers (e.g., Wagner et al., 2011; Touboulic et al., 2014; Chae et al., 2017).
However, we should acknowledge that this is not always the case. Sometimes, the
power of suppliers to their customers is equivalent or even higher (e.g., Apple–
Samsung). We found no such cases in our sample, and thus failed to delve into this
issue of whether the reversal may result in a different market reaction. Based on
the attribution characteristics (i.e., power–foresight), we could argue that the chain
liability for CR may not occur if the alleged suppliers have power (size, market
value, etc.) over their customers. This means that the reversal situation may elicit
an opposite market reaction, that is, more negative to suppliers than customers
(Jacobs & Singhal, 2020). Thus, future research should investigate this aspect by
explicitly measuring the power differential between customers and suppliers.
Fourth, to better capture the stock price effect of CR in the supply chain con-
text, this study builds on Karpoff et al.’s (2008) framework. However, we found
that some events in our sample were not fully covered by the framework, and
thus, labeled as “other.” This lack of fit issue seems common in the literature (e.g.,
Sampath et al., 2018). Yet, it may be interesting for future studies to adjust or de-
velop a new framework, better fitting the purpose of CR events in the supply chain
context.
Finally, we propose an optimal response strategy for the onset of CR, that is,
more assertive for upstream CR but more defensive for downstream CR. However,
this suggestion is speculative and not tested empirically, although our findings
somewhat support the statement. It is thus necessary for future studies to validate
the proposed effect of assertive versus defensive strategies on the mitigation of
the consequences of CR. As earlier noted, we believe that such response strate-
gies might be effective only for initial events (i.e., trigger or to a lesser extent
investigation events). Thus, it might be also worth examining how such response
strategies should be adjusted for the later stages of CR.
CONCLUSION
CRs, caused by bribery and/or kickbacks, have been a problem in the global supply
chain for decades (Kim et al., 2018). Against this backdrop, many efforts have been
made to fight corruption. Notable examples include firms’ individual compliance
programs, enforcement actions like the U.S. Foreign Corrupt Practices Act and
the U.K. Bribery Act, or multistakeholder initiatives such as the UNGC’s 10th
Principle. However, these efforts have shown only limited success (Kroll, 2018).
Although firm-, industry- and country-level initiatives are constantly being refined
(UNGC, 2016), CR still seems to be a prevalent issue in the supply chain.
The aim of this study was to advance our understanding of the stock price
effect of CR in the supply chain context. Drawing on a supply chain focused frame-
work for corruption, and on multiple theoretical lenses, our results provide rigor-
ous evidence on how damaging CRs are in the supply chain, and how different the
magnitude is between upstream and downstream CRs. We showed that investors
react negatively to CR attributions in the minds of the target firm’s observers, and
that these reactions are associated with abnormal reductions in the firms’ market
value. However, we found that most of the negative market reaction is captured
close to the onset of CR. Furthermore, as expected, investors reacted more nega-
tively to upstream (vs. downstream) CRs, where the target focal firm is perceived
by observers as a more powerful victim.
Corruption has received a great deal of attention in numerous disciplines. Yet,
this topic is often neglected in the context of supply chain. Few scholarly attempts
have been made to document how damaging corruption in the supply chain can be
to firm performance (e.g., Arnold et al., 2012). However, the evidence seems to be
too narrow or broad to reveal the true economic impact of corruption. This study
is one of the first to fill the void by taking what we refer to as a supply chain view
of CR, which may help encourage collective action in the supply chain. Yet, this
study is only a first step in examining why, how, and how much CR damages firm
value in the supply chain. Needless to say, additional studies are needed to advance
our understanding of this topic.
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APPENDIX A
Sample upstream CR: For Apple Suppliers, Pressure to Win
Sample announcement of upstream CR: Allegations of a kickback scheme orches-
trated by an Apple Inc. employee underscore the pressures on companies that hope
to serve as suppliers to the fast-growing Silicon Valley giant. Paul Shin Devine, a
global supply manager at Apple, was accused in a federal grand jury indictment
with receiving more than $1 million in kickbacks from six Apple suppliers in Asia.
Mr. Devine, who was arrested Friday, was charged with offenses that include wire
fraud, money laundering and unlawful monetary transactions. The indictment also
names Andrew Ang, an employee of one of Apple’s suppliers, who is accused of
wire fraud and conspiracy. (…)
Author: Yukari Iwatani Kane
Publication date: Aug 16, 2010
Sample downstream CR: Alcoa Faces Allegation by Bahrain of Bribery

Sample announcement of downstream CR: A company controlled by the Persian
Gulf state of Bahrain accused Alcoa Corp. of a 15-year conspiracy involving over-
charging, fraud and bribery. A suit in federal court in Pittsburgh by Aluminum
Bahrain BSC alleged that Alcoa steered payments for an aluminum precursor
ingredient to a group of tiny companies abroad, in order to pay kickbacks to a
Bahraini “senior government official.” The Bahraini firm, known as Alba, alleged
that Alcoa had overcharged it for the precursor material, alumina. Bank records
and invoices show that more than $2 billion in Alba’s payments for alumina passed
from Bahrain to tiny companies in Singapore, Switzerland and the Isle of Guernsey.
(…)
Author: Simpson, Glenn R
Publication date: Feb 28, 2008
Kim and Wagner 31
APPENDIX B
The analyses in this appendix are an expansion and a robustness check for H2 and
H3. Table B1 contains regression analyses with the stage of CR (without “other”
events) as an ordinal variable. Table B2 contains regression analyses with CR stage
intercepts. In each table three models with different combinations of control vari-
ables are presented, where Model 1 contains industry level controls, Model 2 firm-
level controls, and Model 3 all controls.
All coefficients for upstream CR and stage of CR in Table B1 are in
the direction proposed in H2 and H3 (most important the coefficients –0.135
and –0.134 in Model 3). Likewise, in Table B2, the coefficients for upstream
CR are negative (most important the coefficient –0.155 in Model 3), and the
Table B1: Regression estimation of CAR [–1, 0] (with stage of CR ordinal).

Variable entered Model 1 Model 2 Model 3
Intercept 0.006 0.002 0.002

(0.933) (0.112) (0.098)
Upstream CR –0.113+ –0.124+ –0.135*
(–1.760) (–1.863) (–1.984)
–0.123+
a
Stage of CR –0.128* –0.134*
(–1.900) (–1.982) (–2.039)
b
Mining & construction 0.005 0.074
(0.073) (1.009)
b
Transportation & public utilities 0.074 0.083
(1.144) (1.269)
b
Wholesale & retail 0.022 0.024
(0.332) (0.358)
b
Services –0.017 0.019
(–0.263) (0.267)
Firm size 0.014 0.007
(0.213) (0.101)
Growth prospect –0.047 –0.054
(–0.654) (–0.720)
Prior performance 0.139+ 0.172*
(1.923) (2.133)
c
n 250 245 245
F for the model 1.265 2.020+ 1.380
R2 (%) 3.03 4.06 5.02
Adjusted R2 (%) 0.63 2.05 1.38
Note:
a
The variable, stage of CR, was coded having resolution as the base (1) and trigger as the
end of the ordinal value (4), with “other” events excluded.
b
c
+
Sample size varies due to missing data.
p < .10.
∗
p < .05.
Table B2: Regression estimation of CAR [–1, 0] (with CR stage intercepts).

Variable entered Model 1 Model 2 Model 3
Upstream CR –0.117+ –0.128+ –0.155*

(–1.805) (–1.892) (–2.246)
Trigger –0.162* –0.255 –0.272
(–2.458) (–0.966) (–1.027)
Investigation –0.122* –0.164 –0.176
(–2.098) (–1.090) (–1.167)
Regulatory 0.019 –0.051 –0.059
(0.286) (–0.220) (–0.252)
Resolution –0.015 –0.065 –0.070
(–0.256) (–0.436) (–0.466)
Other –0.080 –0.114 –0.139
(–1.264) (–0.543) (–0.653)
0.141+
a
Mining & construction 0.049
(0.743) (1.843)
Transportation & public 0.071 0.078
a
utilities (1.228) (1.338)
a
Wholesale & retail 0.027 0.020
(0.434) (0.321)
a
Services –0.024 0.003
(–0.381) (0.053)
Firm size 0.156 0.095
(0.346) (0.205)
Growth prospect –0.079 –0.112
(–0.757) (–1.045)
Prior performance 0.139+ 0.220*
(1.755) (2.392)
b
n 315 310 310
F for the model 2.198* 2.550** 2.159*
R2 (%) 6.72 7.08 8.64
Adjusted R2 (%) 3.66 4.31 4.64
Note:
a
b
+
Sample size varies due to missing data.
p < .10.
∗
p < .05.
∗∗
p < .01.
coefficient size for events closer to the onset is mostly larger than for later-stage
events.
Seongtae Kim (PhD, University of Hull) is an assistant professor of supply chain
management at Aalto University School of Business. Prior to Aalto, Seongtae
was a postdoctoral researcher at the Swiss Federal Institute of Technology Zurich
(ETH Zurich). His current research interests lie in the areas of supply chain
sustainability/ethics, supply chain risk and disruptions, complex supply networks,
and autonomous logistics and supply chains. He is particularly interested in the
confluence of abovementioned research areas with a focus on implications for
society/policy, practice, and research. His work has received several research
Kim and Wagner 33
awards such as the 2019 Best Paper Award in the Journal of Supply Chain
Management.
Stephan M. Wagner (PhD, University of St. Gallen) is a full professor, holds

the Chair of Logistics Management, and is Faculty Director of the HumOSCM
Lab at the Swiss Federal Institute of Technology Zurich (ETH Zurich). Recent
projects investigated supplier innovation and startup suppliers, humanitarian lo-
gistics, as well as digitalization, sustainability, and ethics in operations and supply
chain management. His research has been published in management journals, such
as the Academy of Management Journal or Journal of Management, operations
management journals, such as Journal of Operations Management or Journal of
Supply Chain Management, methods journals, such as Organizational Research
Methods or Sociological Methods and Research, as well as managerial journals
such as Interfaces or California Management Review.

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Decision Sciences © 2020 Decision Sciences Institute

Examining the Stock Price Effect of

Subject Areas: Attribution Theory, Corruption Risk, Event Study, Signaling

Figure 1: CR path from source, incident to effect (Source: own illustration,

firms’ illegitimate behaviors, such as corruption, provoke negative stakeholder

Figure 2: Supply chain view of CR.

reactions from stakeholders, such as consumers and communities (i.e., incidents).

Supply Chain View of CR

Intensity, Reasons, and Consequences of CR in the Supply Chain

given to anticorruption initiatives within and beyond firm boundaries, such as in

THEORY AND HYPOTHESES

Table 1: Prior research on (U.S.) stock market reaction to CR-related events.

Strachan et al. (1983) Corporate crime na 84 CAR[–1, 0] = –1.33%

CR Attributions as Signals of SiR

As noted earlier, corporate illegalities like CR proceed through the follow-

Upstream versus Downstream CRs

Calculating CARs is sensitive to design issues (McWilliams & Siegel, 1997).

Table 2: Descriptive statistics and correlation matrix.

1. CAR [–1, 0] –0.006 0.030

concerns by reporting nonparametric test statistics, such as the Wilcoxon signed-

Table 3: Estimating CAR for CRs.

Prior day [–1] –0.17 (–1.62) 0.06 (–1.01) 49.52 (0.41)

Table 4: CAR [–1, 0] for alternative models.

Mean-adjusted 315 –0.44* (–2.37) –0.17 (–1.60) 52.06 (–0.81)

only marginally significant. The percentage of negative CARs is only significant

Table 5: CAR [–1, 0] by stage of CR.

Trigger 114 –0.90** (–3.04) –0.42** (–2.65) 61.40* (–2.25)

allegedly involved in possible corruption practices. This type of collective event

Results for Hypotheses 2 and 3

Table 6: BHAR for the postannouncement effects of CR.

3 –0.21 (–0.17) 0.11 (–0.38) 48.62 (0.28)

Table 7: Differential effects (CAR –1, 0) of upstream versus downstream CRs

n Mean Median n Mean Median Mean Median

All events 69 –1.04* –0.64* 246 –0.42* –0.24* –0.62 –0.40

To test H3, we split our sample in upstream versus downstream CR events.

Table 8: Regression estimation of CAR [–1, 0].

Intercept –0.021 0.019 –0.006 0.001 –0.012

focal firms should be adaptable to situational change as something unexpected can

Limitations and Future Research

Davidson, W. N., Worrell, D. L., & Lee, C. I. (1994). Stock-market reactions to

Wood, G. (1995). Ethics at the purchasing/sales interface: An international per-

Sample downstream CR: Alcoa Faces Allegation by Bahrain of Bribery

Table B1: Regression estimation of CAR [–1, 0] (with stage of CR ordinal).

Intercept 0.006 0.002 0.002

Table B2: Regression estimation of CAR [–1, 0] (with CR stage intercepts).

Upstream CR –0.117+ –0.128+ –0.155*

Stephan M. Wagner (PhD, University of St. Gallen) is a full professor, holds

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Trigger 114 –0.90 (–3.04) –0.42 (–2.65) 61.40* (–2.25)