Research notes and communications: The effect of product recall announcements on shareholder wealth

Wallace N. Davidson · Dan L. Worrell

266 citations0/0 files storedStrategic Management Journal

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Corporate Finance and Governance Financial Markets and Investment Strategies Corporate Identity and Reputation

Abstract

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.

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1984Corporate financing and investment decisions when firms have information that investors do not have 1977The Determination of Financial Structure: The Incentive-Signalling Approach 1984Corporate Social Responsibility and Financial Performance 1983On corporate governance

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