The Long-term Impact of Reshoring Decisions

1. Made in USA: The Long-Term
Impacts of Reshoring Decisions
Will Xiaowei Zhang
University of British Columbia
April 2018
Preliminary
Acknowledgements
I am very grateful to Dr. Anming Zhang of the University of British
Columbia for his continued mentorship and assistance in my research.
Abstract
In recent years, reshoring has gained global traction earning wide media
coverage and invoking intense political debate. Between rising labour costs
in the far-east, the heightened pursuit of quality and customer service,
rapid adoption of automation in manufacturing, and dramatic shifts in tax
and trade policy, amongst other key factors, manufacturers are growing
ever more likely to reassess their manufacturing location strategies, to
consider moving production back to their home country. This empirical
study attempts to evaluate the long-term impact of this phenomenon on
investors’ returns, on firms’ productivity and on operational efficiency. We
have collected stock return and financial ratio data on 33 US-based firms
who completed reshoring efforts in recent years. Our results indicate that
reshoring in US firms leads to a mean 3.28% increase in 6-month abnormal
returns for investors but a mean 4.54% decline in one-year returns. Both
productivity and efficiency, measured by return on assets, return on equity,
and COGS/revenue ratios, are weakened in subsequent quarters.
Keywords:
Reshoring, event study, shareholder return, operations productivity