 The spillover effect of product recalls on competitors’ market value: The role of corporate product reliabilityDong Liu and Sajeev Varki Journal of Business Research, 2021, vol. 137, issue C, 452-463 Abstract: Prior studies on product recalls have found that product recalls hurt the recalling firm’s market value. However, little is known about how a product recall affects the market value of the recalling firm’s competitors. It is not clear whether a recall helps or hurts the market value of the recalling firm’s competitors. Using data from the US automobile industry, we find that a product recall by a firm with high corporate product reliability hurts the market value of its competitor (negative spillover). Corporate product reliability refers to a firm’s reputation for providing reliable products. However, the negative spillover effect is buffered or attenuated by the corporate product reliability of the competitor. Further, the negative spillover effect of a recall on a competitor’s market value can be detected even when the competitor makes a positive announcement in the form of a new product pre-announcement (NPPA) after a recall in the industry. This effect is again attenuated by the strength of the competitor’s corporate product reliability. Keywords: Product recalls; Corporate product reliability; New product pre-announcement; Spillover effect; Market value (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:137:y:2021:i:c:p:452-463 DOI: 10.1016/j.jbusres.2021.08.047 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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