The Bullwhip Effect and Stock Returns.

This article investigates the relationship between the bullwhip effect (BWE)—a phenomenon in supply chain management where order variability amplifies upstream—and stock price performance using data from approximately 7,200 publicly traded firms between 1985 and 2018. Employing multiple empirical methods, including portfolio formation and multivariate regressions, the study finds no statistically significant or economically meaningful negative impact of the BWE on stock returns, even when considering the propagation of demand distortion from customers to suppliers. While some evidence suggests the BWE negatively affects inventory turnover, no similar effect is found for capacity utilization or accounting-based profitability measures, and margin effects are positive but economically negligible. The findings imply that firms' decisions to tolerate or dampen the BWE may be optimal given their operating contexts, and that the assumed detrimental financial consequences of the BWE warrant further empirical scrutiny.