Date of Award

Summer 2019

Document Type

Open Access Dissertation

Department

Moore School of Business

First Advisor

Satish Jayachandran

Abstract

The dissertation is composed of two essays. In the first essay, authors conceptualize recall environment, test its effect on post-recall stock returns and identify the role of recall and product characteristics in moderating this relationship. The authors test their hypotheses on a sample of 90 recall announcements in the automobile industry from 2011 to 2016. The results show that on average, announcing a recall in an intense environment aggravates negative stock returns accruing from the recall. Further, while low reputation brands are mostly prone to this negative impact of recall environment, high reputation brands are less susceptible to this negative impact. The negative stock returns from recalls could even be eliminated for new products of high reputation brands. The study has implications for firm managers and public policy in terms of the timing and choice of brands and products for a recall announcement.

Moreover, firms are becoming more engaged in corporate social responsibility (CSR) efforts with a questionable impact on firm performance. Specifically, how different CSR activities may help or hurt performance outcomes in case of a negative firm event is not apparent. The second essay examines how a firm’s CSR record in philanthropy and sustainability domains may alter the negative outcomes of a product recall announcement. Using a sample of 265 monthly recall observations from the automobile industry from 2011 to 2014, authors find that while philanthropy efforts may help firms attenuate part of the market penalties accruing from a product recall, sustainability efforts have an inverted U-shape association with market penalties.

Our findings show that low levels of sustainability efforts will intensify but high levels will decrease a recall’s damage to the market performance. It is also found that the effect of both philanthropy and sustainability efforts decreases when the recall involves lower reputation brands and younger products. The study has implications for managers in terms of adjusting pre-recall CSR efforts in different domains to manage financial damage of a product recall.

Rights

© 2019, Seyyed Amirali Javadinia

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