Recall Campaign Timing: The Impact on Sales and Stock Market Performance.

The purpose of this study is to build and test theory regarding the effects of product recall timing on a firm's stock performance and sales. The impact on firm performance is assessed from moving first with a recall campaign in an industry sector, the time relative to a competitor's recall campaign of substitutable products, and the time between the day the defect notification was submitted to a federal agency by the manufacturer and the day when owners are notified that a solution is in place. Using National Highway Traffic Safety Administration (NHTSA) data for the period of 2010-2015, the study employs an event study methodology, which involves examining the changes in specific variables of interest around the time of an event. We find that delaying recall campaigns vis-à-vis your competitors, though advantageous, has a diminishing returns to impact on firm performance. In addition, we identify advantages of initiating the recall campaign first from a sales perspective. Finally, we also find a negative impact from delayed resolution to recalls. [ABSTRACT FROM AUTHOR]