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The deterrent to dubious corporate behavior: Profitability, probability and safety recalls
Author(s) -
Marcus Alfred
Publication year - 1989
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.4250100304
Subject(s) - profitability index , stock (firearms) , stock market , business , economics , production (economics) , microeconomics , industrial organization , marketing , finance , engineering , mechanical engineering , paleontology , horse , biology
Abstract In response to findings of abnormal stock market reactions following such dubious corporate behaviors as bribery, fraud, and the production of hazardous products, some researchers have argued that the stock market reaction is a sufficient deterrent to these behaviors so that additional regulation is not necessary. In this paper we examine stock market returns as a deterrent to dubious behavior in the production of defective automobiles. Relying on a broader range of assumptions about managerial behavior than are used in previous studies, we question the efficacy of the market as an instrument of social control.