The influence of maritime freight cost tail risk on publicly traded industrial and transport companies

Abstract

This study examines the influence of maritime freight cost tail risk events on stock market prices of industrial and transport-related firms. Our findings reveal a significant asymmetry: extreme negative movements in these indices have a disproportionately large adverse impact on stock returns compared to extreme positive movements. As these indices serve as barometers of global economic health, sharp declines signal contractions in global demand, fuelling investor apprehension. These concerns outweigh the potential benefits of lower input costs for most firms. We also uncover substantial heterogeneity amongst stock responses. Notably, owing to their perceived higher risk, smaller firms and those with ESG controversies are more severely impacted by these negative tail-risk events. Further, we document that strong ESG commitments are sometimes beneficial during negative tail risk events, but not always. These mixed findings suggest that the effects of ESG commitments during tail risk events operate through multiple channels, and these impacts may vary depending on firm characteristics and the nature of the ESG activity.