The Effect of Reshoring Announcement on Company Share Price

Abstract

The reshoring trend has gained momentum among manufacturing companies, which increasingly decide to relocate their production activities back to their home country. In this article, we explore the relationship between the motivations guiding the decision to reshore and the companies’ shareholder value. Particularly, taking an eclectic paradigm perspective, we aim to understand whether the motivations driving the companies’ decisions to reshore explain changes in the shareholder value. Empirically, we built an ad-hoc database based on 370 reshoring decisions involving the USA as a reshoring destination and announced in the 10-year time window ranging from 2009 to 2018. Our results highlight that resource seeking, market seeking and strategic asset seeking motivations positively affect the share price of the companies, while there are no market reactions when companies repatriate their activities because of efficiency-seeking motivations. This study extends previous literature offering explanations about how changes in the companies’ share price depend on the different reshoring motivations (i.e., efficiency seeking, resource seeking, market seeking, and strategic asset seeking motivations) pursued by the reshoring companies. Moreover, this study offers important implications for managers of companies undertaking reshoring decisions.