Supply Chain Risk : Measurement and Real Effects

We use Natural Language Processing to measure supply chain risk (SCR) faced by US firms, as expressed in narratives of quarterly earnings conference calls. We show that exposure to SCR reached unprecedented levels during COVID-19. The effect of COVID-19 on SCR is more pronounced in firms with less profitable operations, a greater dispersion of analyst forecasts, increased complexity, more financial constraints and those in industries more vulnerable to supply chain disruptions. We document a negative effect of SCR on conference call short-term returns and future profitability. High-SCR firms are also associated with longer cash conversion cycles and more ESG overselling