Abstract
This study examines the impact of the UK Modern Slavery Act (UK MSA) on firms and stakeholders, highlighting significant shareholder reactions. Investors initially respond negatively, likely due to uncertainty and compliance costs, but subsequently experience long-term gains, reflecting improvements in operational efficiency and corporate reputation. Firms operating in highly competitive markets benefit more substantially, exhibiting a reduction in supplier-related human rights violations due to enhanced supply chain monitoring. These firms also achieve higher profitability through cost savings, increased sales growth, and enhanced firm value, driven by strengthened reputational capital and positive investor and customer sentiment. Our findings suggest that, in competitive environments, firms can strategically leverage ethical business practices to differentiate themselves and secure a sustainable competitive advantage.