Kirk T. Hartley
Academic Work On the Stock Price Impact of Product Recalls
An academic research project on the stock price impact of product recalls is described in a February 1, 2021 blog post from Christopher Moriarty of Motley Rice. It cites to: https://epublications.marquette.edu/cgi/viewcontent.cgi?article=1332&context=mgmt_fac
Per Mr. Moriarty:
Recent academic research supports the notion that product recalls have a detrimental effect on a company’s stock price and thus shareholder wealth. Reviewing 296 product recall announcements over a 10-year period, researchers found a significant negative reaction of company share prices in response to product recalls, and that such impacts are felt most acutely in the automotive and pharmaceutical industries. Unsurprisingly, investors reacted more strongly to recalls associated with higher risks of injury or death and the authors noted that shareholders are interested in how the company handles a recall (whether it appeared to “care”).