An Empirical Study On Market Response Of Product Recall In The Context Of Media Attention And Advertising

Product safety issues are all important to companies,testing the daily business activities of enterprises.What ’s more,it’ s a great challenge for company to deal with the product recalls and keep calm.One of the main reasons is that product safety issues have the great influence on our lives.In recent years,with the continuous improvement of relevant systems,domestic product recalls have become more frequent and intensified in the era of social media,especially in the automotive industry.Based on the efficient market hypothesis,information transmission theory and other theories,this article will select the event research window period [-5,+5] and the robustness test window period [-10,10] to conduct event research methods and data analysis.This research mainly answers three important practical questions: First,when a company has a product recall crisis,will the market have a negative effect? Second,for crisis companies,what are the factors that affect market response? Third,will media attention and advertising investment affect the market response to product recalls? If so,how should this negative effect be mitigated?The research results show that:(1)Product recalls will have a negative impact on the company’s stock market,and this negative impact has already existed two days before the announcement of the product recall.(2)The follow-up remedial measures of the recall and the time difference of the recall will have a significant impact on the market response of the company.This study found that the company’s "replacement" remedial measures have a greater impact,and the longer the recall interval,the more significant the negative effect of the stock.(3)The higher the media attention,the stronger the negative relationship between the recall time difference and the market response,but the media attention didn’t play a part in the impact on the relationship between the replacement remedial measures and the market response.(4)Advertising investment can alleviate the negative relationship between recall time difference and market response.The impact of advertising can be used as a buffer for the negative impact of product recalls,reducing the negative impact of product recalls on company stock returns.whereas,the impact of advertising investment on the relationships between subsequent remedial measures and stock returns is not significant.To sum up,this article takes automobile recalls as the background to study the impact of recalls on the market response of enterprises.Based on theoretical analysis and actual demand,this research explores the market reaction and the factors affecting changes in the product,and focuses on the role played by media attention and advertising investment in the event,trying to verify and solve the following problems through empirical analysis,and then Contributing some theoretical and practical guidance to recall management has more intuitive and important economic significance.