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.
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