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 Abstract:

This paper investigates firms' responses to transparency requirements on socially responsible sourcing. We document that firms “clean up” their supplier bases when subject to Section 1502 of the Dodd-Frank Act, which mandates the disclosure of sourcing information on conflict minerals. Firms drop non-U.S. suppliers while retaining U.S. ones, as they are also subject to the regulation and perceived as lower risk. This reflects a trade-off between adjustment costs and non-compliance costs of maintaining socially responsible supply chains. We show that firms replace high-risk suppliers with more ESG-compliant alternatives, a shift that translates to improved sales growth and higher firm value.

 Bio:

https://www.nhh.no/en/employees/faculty/jiaying-li/

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