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Research notes and communications: The effect of product recall announcements on shareholder wealth
Author(s) -
Davidson Wallace N.,
Worrell Dan L.
Publication year - 1992
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.4250130606
Subject(s) - product (mathematics) , shareholder , recall , business , government (linguistics) , event study , monetary economics , marketing , advertising , economics , corporate governance , finance , psychology , paleontology , linguistics , philosophy , context (archaeology) , geometry , mathematics , cognitive psychology , biology
Abstract Previous research Has found that product recall announcements in the automobile industry are associated with negative abnormal returns. We extend this research by examining announcements of product recalls and products taken off the market outside the automobile industry. We find negative abnormal returns for these announcements and that the returns are significantly more negative when products are replaced (or the purchase price is returned) than when the products are checked and repaired. We find only limited evidence that government‐ordered recalls produce more negative returns than voluntary recalls.