Product Recalls and Security Prices: New Evidence From the US Market

Posted: 31 May 2019

See all articles by Omer Unsal

Omer Unsal

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

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Duygu Zirek

University of New Orleans - College of Business Administration - Department of Economics and Finance

Date Written: July 14, 2017

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.

Keywords: Product recall, Market reaction, Stock valuation, Event study, Abnormal return

JEL Classification: G3, G14, M30, M48

Suggested Citation

Unsal, Omer and Hassan, M. Kabir and Zirek, Duygu, Product Recalls and Security Prices: New Evidence From the US Market (July 14, 2017). Journal of Economics and Business, Vol. 93, 2017. Available at SSRN: https://ssrn.com/abstract=3384789

Omer Unsal (Contact Author)

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

315 Turnpike St
North Andover, MA 01845
United States

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

Duygu Zirek

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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