The contagion and competitive effects across national borders: Evidence from the 2016 Kumamoto earthquakes

Li Ding, Hugo K.S. Lam, T. C.E. Cheng, Honggeng Zhou

Research output: Journal article publicationJournal articleAcademic researchpeer-review

10 Citations (Scopus)


It is unclear how a natural disaster such as earthquake affects disaster-stricken firms' industry peers located in other countries. While those industry peers might benefit from the disaster due to the competitive advantage gained over the disaster-stricken firms (positive competitive effect), they might also suffer from the disaster due to their linkages to the disaster-stricken firms (negative contagion effect). Based on a natural experiment in which a series of earthquakes struck Kumamoto, Japan's Silicon Island, in April 2016, we find that the earthquakes have a negative impact on the stock returns of the semiconductor manufacturers located in China, suggesting that the contagion effect overweighs the competitive effect. Moreover, the negative impact is more pronounced for firms with supply chain connections with Japanese firms. However, we also find a positive impact among Chinese firms with high inventory turnover and customer concentration. Overall, our research reveals the dynamic effects of a natural disaster across national borders, urging firms to pay attention to the negative contagion effect through supply chain linkages and the positive competitive effect resulting from better operational efficiency.

Original languageEnglish
Article number108115
JournalInternational Journal of Production Economics
Publication statusPublished - May 2021


  • Competitive effect
  • Contagion effect
  • Earthquake
  • Event study
  • Operational efficiency
  • Stock return

ASJC Scopus subject areas

  • General Business,Management and Accounting
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering


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