Does a firm's product-recall strategy affect Its financial value? An examination of strategic alternatives during product-harm crises

Journal of Marketing

Volumn 73, Issue 6, 2009, Pages 214-226

  Chen, Yubo ^a   Ganesan, Shankar ^a   Liu, Yong ^a  

^a UNIVERSITY OF ARIZONA   (United States)

Author keywords

Crisis management; Event study; Firm financial value; Firm reputation; Proactive and passive strategies; Product recalls

Indexed keywords

EID: 70449347286     PISSN: 00222429     EISSN: None     Source Type: Journal    
DOI: 10.1509/jmkg.73.6.214     Document Type: Article

References (55)

1. Aaker, David A. and Kevin Lane Keller (1990), "Consumer Evaluations of Brand Extensions," Journal of Marketing, 54 (January), 27-41.
2. Agrawal, Jagdish and Wagner Kamakura (1995), "The Economic Worth of Celebrity Endorsers: An Event Study Analysis," Journal of Marketing, 59 (July), 56-62.
3. Ahluwalia, Rohini, Robert E. Burnkrant, and H.R. Unnava (2000), "Consumer Response to Negative Publicity: The Moderating Role of Commitment," Journal of Marketing Research, 37 (May), 203-214.
4. Baron, Reuben M. and David A. Kenny (1986), "The ModeratorMediator Variable Distinction in Social Psychological Research: Conceptual, Strategic, and Statistical Considerations," Journal of Personality and Social Psychology, 51 (6), 1173-1182
5. Benartzi, Shlomo and Richard H. Thaler (1995), "Myopic Loss Aversion and the Equity Premium Puzzle," Quarterly Journal of Economics, 110 (1), 73-92.
6. Berman, Barry (1999), "Planning for the Inevitable Product Recall," Business Horizons, 42 (2), 69-78.
7. Boehmer, Ekkehart, Jim Musumeci, and Annette Poulsen (1991), "Event-Study Methodology Under Conditions of Event-Induced Variance," Journal of Financial Economics, 30 (2), 253-272
8. CPSC (1999), Recall Handbook. Bethesda, MD: U.S. Consumer Product Safety Commission, Office of Compliance, Recalls and Compliance Division, (May), (accessed March 15, 2009), [available at http://www.cpsc.gov/BUSINFO/8002.html].
9. - (2005), Regulated Products Handbook. Bethesda, MD: U.S. Consumer Product Safety Commission, Office of Compliance, Recalls and Compliance Division, (January), (accessed March 15, 2009), [available at http://www.cpsc.gov/businfo/ 8001.pdf].
10. - (2006), "Playskool Voluntarily Recalls Toy Tool Benches After the Death of Two Toddlers," (September 22), (accessed March 15, 2009), [available at http://www.cpsc.gov/cpscpub/ prerel/prhtml06706266.html].
11. Davidson, Wallace, III, and Dan Worrell (1992), "The Effect of Product Recall Announcements on Shareholder Wealth," Strategic Management Journal, 13 (6), 467-473
12. Dawar, Niraj and Madan M. Pillutla (2000), "Impact of ProductHarm Crises on Brand Equity: The Moderating Role of Consumer Expectations," Journal of Marketing Research, 37 (May), 215-226
13. Epstein, Larry G. and Martin Schneider (2008), "Ambiguity, Information Quality, and Asset Pricing," Journal of Finance, 63 (1), 197-228.
14. Fombrun, Charles and Mark Shanley (1990), "What's in a Name? Reputation Building and Corporate Strategy," Academy of Management Journal, 33 (2), 233-258
15. Geyskens, Inge, Katrijn Gielens, and Mamik Dekimpe (2002), "The Market Valuation of Internet Channel Additions," Journal of Marketing, 66 (April), 102-119.
16. Greene, William (2000), Econometric Analysis. Upper Saddle River, NJ: Prentice Hall.
17. Hamilton, Barton and Jackson Nickerson (2003), "Correcting for Endogeneity in Strategic Management Research," Strategic Organization, 1 (1), 51-78.
18. Heckman, James (1979), "Sample Selection Bias as a Specification Error," Econométrica, 47 (1), 153-161
19. Hoffer, George, Stephen Pruitt, and Robert Reilly (1988), "The Impact of Product Recalls on the Wealth of Sellers: A Reexamination," Journal of Political Economy, 96 (3), 663-670
20. Horsky, Dan and Patrick Swyngedouw (1987), "Does It Pay to Change Your Company's Name? A Stock Market Perspective," Marketing Science, 6 (4), 320-335
21. Jarrell, Gregg and Sam Peltzman (1985), "The Impact of Product Recalls on the Wealth of Sellers," Journal of Political Economy, 93 (3), 512-536
22. Joshi, Amit and Dominique Hanssens (2009), "Movie Advertising and the Stock Market Valuation of Studios: A Case of 'Great Expectations'?" Marketing Science, 28 (2), 239-250
23. Kenny, David A., Deborah A. Kashy, and Niall Bolger (1998), "Data Analysis in Social Psychology," in The Handbook of Social Psychology, Vol.1, 4th ed. Daniel Gilbert, Susan Fiske, and Gardner Lindzey, eds. Boston: McGraw-Hill, 233-265
24. Lane, Vicki and Robert Jacobson (1995), "Stock Market Reactions to Brand Extension Announcements: The Effects of Brand Attitude and Familiarity," Journal of Marketing, 59 (January), 63-77.
25. Laufer, Daniel and W Timothy Coombs (2006), "How Should a Company Respond to a Product Harm Crisis? The Role of Corporate Reputation and Consumer-Based Cues," Business Horizons, 49 (5), 379-385
26. Luo, Xueming and C.B. Bhattacharya (2006), "Corporate Social Responsibility, Customer Satisfaction, and Market Value," Journal of Marketing, 70 (October), 1-18.
27. MacKinlay, A. Craig (1997), "Event Studies in Economics and Finance," Journal of Economics Literature, 35 (1), 13-39.
28. MacKinnon, David P., Jennifer Krull, and C.M. Lockwood (2000), "Equivalence of the Mediation, Confounding, and Suppression Effect," Prevention Science, 1 (4), 173-181
29. Margolis, Joshua D., Hillary Elfenbein, and James Walsh (2007), "Does It Pay to Be Good? A Meta-Analysis and Redirection of Research on Corporate Social and Financial Performance," working paper, Harvard Business School, Harvard University.
30. McWilliams, Abagail and Donald Siegel (1997), "Event Studies in Management Research: Theoretical and Empirical Issues," Academy of Management Journal, 40 (3), 626-657
31. Mitchell, Mark and Erik Stafford (2000), "Managerial Decisions and Long-Term Stock Price Performance," Journal of Business, 73 (3), 287-329.
32. Mulian, J. Gibson (2004), "Reporting Safety Problems: U.S. Perspective," (accessed March 15, 2009), [available at http://www. icphso.org/oldfiles/international/2004Euro/2004/London 1 .pdf).
33. Myers, Stewart and Nicholas S. Majluf (1984), "Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have," Journal of Financial Economics, 13 (June), 187-221.
34. Orlitzky, Marc, Frank L. Schmidt, and Sara Rynes (2003), Corporate Social and Financial Performance: A Meta-Analysis," Organization Studies, 24 (3), 403-441. (Pubitemid 36937857)
35. Patell, James (1976), "Corporate Forecasts of Earnings per Share and Stock Price Behavior: Empirical Tests," Journal of Accounting Research, 14 (2), 246-276
36. Pearson, Christine and Judith Clair (1998), "Reframing Crisis Management," Academy of Management Review, 23 (1), 59-76.
37. Prince, David and Paul Rubin (2002), "The Effects of Product Liability Litigation on the Value of Firms," American Law and Economics Review, 4(1), 44-87.
38. Pruitt, Stephen W. and David R. Peterson (1986), "Security Price Reactions Around Product Recall Announcements," Journal of Financial Research, 9 (2), 113-122
39. Ramani, Girish and V. Kumar (2008), "Interaction Orientation and Firm Performance," Journal of Marketing, 72 (January), 27-45.
40. Rhee, Mooweon and Pamela R. Haunschild (2006), "The Liability of Good Reputation," Organization Science, 17 (1), 101-117.
41. Ross, Stephen A. (1977), "The Determination of Financial Structure," Bell Journal of Economics, 8 (1), 23-40.
42. Samuel, Cherian (1996), "Stock Market and Investment: The Governance Role of the Market," World Bank Policy Research Working Paper (March).
43. Schoem, Marc (2001), "Product Safety Enforcement and Recalls in the United States," (accessed March 15, 2009), [available at http://www.konsumentverket.se/Documents/in-english/ conferences-seminars/ consumer-product-recall-2001/ Sweden1.ppt].
44. Sharma, Anurag and Nelson Lacey (2004), "Linking Product Development Outcomes to Market Valuation of the Firm," Journal of Product Innovation Management, 21 (5), 297-308.
45. Shaver, J. Myles (1998), "Accounting for Endogeneity When Assessing Strategy Performance: Does Entry Mode Choice Affect FDI Survival?" Management Science, 44 (4), 571-585
46. Siegel, Donald S. and Donald F. Vitaliano (2007), "An Empirical Analysis of the Strategic Use of Corporate Social Responsibility," Journal of Economics & Management Strategy, 16 (3), 773-792
47. Siomkos, George and Gary Kurzbard (1994), "The Hidden Crisis in Product-Harm Crisis Management," European Journal of Marketing, 28 (2), 30-41.
48. Song, X. Michael, Jinhong Xie, and Barbara Dyer (2000), "Antecedents and Consequences of Marketing Managers' Conflict-Handling Behaviors," Journal of Marketing, 64 (January), 50-66.
49. Sullivan, Mary (1990), "Measuring Image Spillovers in UmbrellaBranded Products," Journal of Business, 63 (3), 309-329.
50. Tellis, Gerard and Joseph Johnson (2007), "The Value of Quality," Marketing Science, 26 (6), 758-773
51. Thomsen, Michael and Andrew McKenzie (2001), "Market Incentives for Safe Foods," American Journal of Agricultural Economics, 82 (3), 526-538
52. Tversky, Amos and Daniel Kahneman (1991), "Loss Aversion in Riskless Choice: A Reference-Dependent Model," Quarterly Journal of Economics, 107 (4), 1039-1061.
53. Van Heerde, Harald, Kristiaan Helsen, and Marnik Dekimpe (2007), "The Impact of a Product-Harm Crisis on Marketing Effectiveness," Marketing Science, 26 (2), 230-245
54. Viale, Ariel M. (2007), "Testing Overreaction and Underreaction to Macroeconomic News," working paper, Mays Business School, Texas A&M University.
55. Waddock, Sandra A. and Samuel B. Graves (1997), "Quality of Management and Quality of Stakeholder Relations: Are They Synonymous?" Business & Society, 36 (3), 250-279