The impact of reshoring decisions on shareholder wealth

TLDR

Reshoring—returning manufacturing and service operations to the U.S.—has gained momentum, yet no academic evidence exists on its impact on shareholder value. The study investigates how reshoring decisions affect shareholder wealth. It analyzes 37 reshoring announcements by U.S. firms between 2006 and 2015.

Abstract

Abstract Interest in reshoring, defined as the return of manufacturing and service operations from previously offshored locations to the U.S., has gained momentum recently. Yet, there is no academic evidence on the shareholder value implications of reshoring decisions. This paper analyzes the shareholder wealth effects of 37 reshoring decisions announced by U.S. firms during 2006–2015. Our results indicate that reshoring announcements result in positive abnormal stock returns. Mean (median) abnormal stock returns on reshoring announcements are 0.45% (0.29%), corresponding with a mean (median) market value change of $322.57 million ($31.60 million). Our findings imply that the benefits associated with the reshoring tend to outweigh the costs. This finding is relevant for firms faced with the decision of whether to move business activities from offshore to domestic locations. It is also of interest to policy makers who may seek to further stimulate the reshoring phenomenon.