Abstract

We investigate the role of the degree of fatalities in the impact of an aviation disaster on the stock prices of the crash airline and its rival airlines. Our results show that aviation disasters are followed by deeper negative rates of return for the crash airlines as the degree of fatalities increase. The rival airlines may benefit from the disasters if the number of deaths is single-digit due to the switching effect. However, the rival airlines may also suffer negative rates of return on their stocks after a larger scale aviation disaster that results in two-digit or three-digit fatalities because of the spillover effect. Overall, aviation disaster cause higher market value losses for the crash airlines than for the non-crash airlines.

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