The Influence of Aviation Disasters on Engine Manufacturers: An Analysis of Financial and Reputational Contagion Risks

40 Pages Posted: 8 Jan 2021

See all articles by Erdinc Akyildirim

Erdinc Akyildirim

ETH Zürich - Department of Mathematics

Shaen Corbet

Dublin City University ; University of Waikato - Management School

John F. O'Connell

affiliation not provided to SSRN

Ahmet Sensoy

Borsa Istanbul

Date Written: November 3, 2020

Abstract

One of the key sub-sectors in the aviation industry includes that of engine manufacturers, who have long led technological advancement and the battle to reduce airline carbon emissions. However, these same companies have been susceptible to a number of issues that have been central to international airlines due to higher costs and competition pressures. When an aviation disaster occurs, there is widespread allocation of blame and responsibility, which has left engine manufacturers exposed until the true cause is identified. This can generate many issues with regards to reputational damage and ability to generate finance. We set out to analyze such interactions over time and region. Our results indicate that engine manufacturers have had to contend with substantial income and financial leverage issues in the aftermath of a major aviation disaster, irrespective of whether they have been identified as a causation factor in the incident itself. Further, we clearly identify that there exists an average one day loss of 1.64% in the immediate aftermath of aviation incidents. Substantial corporate instability is found to persist without the company being in any way responsible for the incident. Shortly thereafter, contagion effects increase as speculation diminishes and more factual evidence arrives. The role of social media is examined as a potential contributory factor.

Keywords: Aviation Disasters; Contagion; Engine Manufacturers; Financial Markets; Reputational Risks; Tourism; Transport

Suggested Citation

Akyildirim, Erdinc and Corbet, Shaen and O'Connell, John F. and Sensoy, Ahmet, The Influence of Aviation Disasters on Engine Manufacturers: An Analysis of Financial and Reputational Contagion Risks (November 3, 2020). Available at SSRN: https://ssrn.com/abstract=3724399 or http://dx.doi.org/10.2139/ssrn.3724399

Erdinc Akyildirim

ETH Zürich - Department of Mathematics ( email )

ETH Zentrum HG-F 42.1
Raemistr. 101
CH-8092 Zurich, 8092
Switzerland

Shaen Corbet (Contact Author)

Dublin City University ( email )

Dublin 9
Ireland

University of Waikato - Management School ( email )

Hamilton
New Zealand

John F. O'Connell

affiliation not provided to SSRN

Ahmet Sensoy

Borsa Istanbul ( email )

Reşitpaşa mh.
Tuncay Artun cd.
Istanbul, 34467
Turkey

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
13
Abstract Views
165
PlumX Metrics