Does Pre-Recall Advertising Affect Abnormal Stock Returns of a Product Recall:An Event Study Analysis
Product recalls can cause uncertainty about firms’ future earnings.The financial market under uncertainty may use firm-initiated marketing near a recall as internal information to predict the consequences of the recall.When approaching a recall,firms may increase,decrease,or maintain the previous level of advertising.In this study,using automobile safety recalls during the period 2005-2011,we investigate whether and how advertising near auto recalls affects abnormal stock returns due to the recalls.Using an event-study analysis,we find that adjustments of pre-recall advertising in opposite directions (increase vs.decrease) as well as at two levels (recalled products vs.unrecalled products) impose different impacts on the stock market: for recalled products,an increase of advertising does not affect the stock market,while a decrease exerts a negative impact.For unaffected products,an increase of advertising is rewarded by the market,but a decrease is penalized.These findings identify a connection between pre-crisis advertising and firm value in recall crises,and such a connection may help in the creation of marketing strategies to deal with crisis management from the investors’ point of view.
advertising product recalls firm value event study crisis management
Haibing Gao Jinhong Xie Qi Wang Kenneth C Wilbur
Warrington College of Business Administration,University of Florida School of Management,State University of New York at Binghamton Fuqua School of Business,Duke University
国内会议
北京
英文
1-43
2013-08-16（万方平台首次上网日期，不代表论文的发表时间）