Product Recalls, Lobbying, and Firm Value

Management Decision (2018), Vol. 57 Issue: 3, pp.724-740

Posted: 7 May 2019

See all articles by Blake Rayfield

Blake Rayfield

Indiana State University - Scott College of Business; Networks Financial Institute

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance

Date Written: July 29, 2018

Abstract

Purpose: The purpose of this paper is to use a unique, hand-collected data set of Food and Drug Administration (FDA)-approved products to understand the effect of lobbying on the product market. The authors gather total 86,462 FDA labels including drug patents, drugs, pre-market approvals and medical devices and test the relationship between lobbying and future firms’ product submissions.

Design/methodology/approach: Using a sample of 86,462 FDA labels including drug patents, drugs, pre-market approvals and medical devices, the authors test the effect of lobbying on a firm’s future product submissions using survival analysis, logit, difference-in-differences and propensity score matching techniques.

Findings: The authors find lobbying firms experience an increase in the number of medical products approved. However, increased number of FDA labeling comes at the cost of product failure. The authors document that lobbying increases product recalls when responsible firms are associated with higher market withdrawals.

Originality/value: This study contributes to both the management literature on corporate lobbying and product recalls. Additionally, the study reveals the connection between pharmaceutical lobbying and firm value.

Keywords: Product Recall, Firm Value, FDA Approval

JEL Classification: L15, M11, I18, D72

Suggested Citation

Rayfield, Blake and Unsal, Omer, Product Recalls, Lobbying, and Firm Value (July 29, 2018). Management Decision (2018), Vol. 57 Issue: 3, pp.724-740, Available at SSRN: https://ssrn.com/abstract=3368682

Blake Rayfield (Contact Author)

Indiana State University - Scott College of Business ( email )

800 Sycamore Street
Terre Haute, IN 47809
United States

Networks Financial Institute ( email )

Indianapolis, 46208
United States

Omer Unsal

Merrimack College - Girard School of Business - Department of Accounting and Finance ( email )

315 Turnpike St
North Andover, MA 01845
United States

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