Product Recalls: From Brand Perceptions to Financial Market Performance

摘要

Companies incur significant direct and indirect costs related to product recalls. In particular, the loss of customer confidence or damage to the firm's reputation carry the potential for significant reductions in the manufacturer's future cash flows and stock market value. We suggest that brand equity, specifically customer-based brand equity, serves as the mechanism through which consumer perceptions of a product recall ultimately influence or do not influence the impact of a recall on the market value of the firm. We propose a protective role that minimizes the negative impact a product recall will have on firm reputation and financial performance. We test the influence of brand equity on both investor and consumer responses to product recall announcements. We begin our hypotheses by establishing a negative main effect of a recall, followed by consideration of the moderating effects of brand equity. We then examine two underlying dimensions of customer-based brand equity (familiarity and quality) to further explain their moderating effects on reactions to recalls and their possible interactions.