Stock Price and Analyst Earnings Forecast around Product Recall Announcements

Abstract

Product recalls have long been recognised to have an impact on firm value. We revisit this issue using more recent data across different industries. We also examine the recall impact on the the firm’s expected performance using analyst’ earnings forecasts. The results show that product recall announcements negatively affect stock prices and analysts’ earnings forecasts. However, there is weak evidence on the market response between characteristics-based subsamples of recalls.

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