Service crisis recovery and firm performance: insights from information breach announcements

Shahin Rasoulian (), Yany Grégoire (), Renaud Legoux () and Sylvain Sénécal ()
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Shahin Rasoulian: HEC Montreal
Yany Grégoire: HEC Montreal
Renaud Legoux: HEC Montreal
Sylvain Sénécal: HEC Montreal

Journal of the Academy of Marketing Science, 2017, vol. 45, issue 6, No 2, 789-806

Abstract: Abstract The extant literature has studied the effects of a firm’s service recovery efforts on the reactions of customers and employees following an individual service failure. However, the impact of recovery efforts on a firm’s performance after a public and large service failure—such as a large-scale information breach—has received scant attention. To address this gap, this current research develops a framework and finds support for the impact of service crisis recoveries on a firm’s performance, as measured by firm-idiosyncratic risk. Using a unique dataset of service crisis recoveries, the authors find that firms offering compensation (i.e., tangible redresses) or process improvement (i.e., improvements in organizational processes) show more stable performance (less idiosyncratic risk), from two quarters to two calendar years after the announcement of their recovery plan. In line with the documented dual effect of apologies, firms that offer apology-based recoveries display more volatile performance (higher idiosyncratic risk). Of note, this volatility increases with the number of affected individuals, and it remains unaffected even when the apology is expressed with high intensity.

Keywords: Service crisis; Service crisis recovery; Firm risk; Shareholder value; Marketing–finance interface; Information breach (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (11)

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DOI: 10.1007/s11747-017-0543-8

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