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Product recall and CEO compensation: Evidence from the automobile industry

Author

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  • Malik, Mahfuja
  • Jebari, Fatima

Abstract

This study examines the association between product recall and CEO compensation. Using a sample of U.S. automobile industry product recalls from 1999 to 2018, we find that product recalls have significant negative impacts on CEO compensation. Our findings hold after controlling for the common determinants of CEO compensation, such as firms’ stock market and operating performance and CEO-specific characteristics. An additional analysis shows that CEOs’ total and long-term compensation decreases with the number of recalls. However, we find no association between CEOs’ cash compensation and product recalls.

Suggested Citation

  • Malik, Mahfuja & Jebari, Fatima, 2023. "Product recall and CEO compensation: Evidence from the automobile industry," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323001885
    DOI: 10.1016/j.frl.2023.103815
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    References listed on IDEAS

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    More about this item

    Keywords

    Product recall; CEO compensation; Automobile industry;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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