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Product recalls and security prices: New evidence from the US market

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  • Unsal, Omer
  • Hassan, M. Kabir
  • Zirek, Duygu

Abstract

We examine 1460 product recalls that were announced by U.S Official Agencies between January 1990 and December 2014. Consistent with previous research, we report statistically significant negative abnormal returns during the announcement dates. Moreover, our results suggest two main objectives. First, we find that the effect of product recalls vary for industries in terms of operation and competition. Second, we show that recall announcements cause spillover effect at industry where rival firms receive short term positive abnormal returns during announcement dates. Over post-announcement periods, cumulative abnormal returns (CARs) lose significance and results are robust for both selected market index and estimation method.

Suggested Citation

  • Unsal, Omer & Hassan, M. Kabir & Zirek, Duygu, 2017. "Product recalls and security prices: New evidence from the US market," Journal of Economics and Business, Elsevier, vol. 93(C), pages 62-79.
    • Handle: RePEc:eee:jebusi:v:93:y:2017:i:c:p:62-79
    DOI: 10.1016/j.jeconbus.2017.07.003
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    Cited by:

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    3. Rashid Ameer & Radiah Othman, 2023. "Stock market reactions to US Consumer Product Safety Commission enforcement actions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3709-3735, September.
    4. Malik, Mahfuja & Jebari, Fatima, 2023. "Product recall and CEO compensation: Evidence from the automobile industry," Finance Research Letters, Elsevier, vol. 54(C).

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    More about this item

    Keywords

    Product recall; Market reaction; Stock valuation; Event study; Abnormal return;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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