Honey, we have to talk! How Shareholders React to the Design of Product Recall Messages

Previous research showed that consumers as well as shareholders react negatively to product recalls. Research holds that adapting the recall communication to the recall specific setting helps to minimize negative consumer reactions. However, marketing research has so far not investigated how investors react to the design of the recall message. The present study assembles a unique data set of all German product recalls between 2007 and 2010. Using an event study approach abnormal returns for 60 recalling companies were calculated. Explaining abnormal returns by the design of the recall message, the study delivers important insights for marketers. In contrast to their larger counterparts, smaller companies profit from emphasizing social responsibility and providing strong identification help. Larger companies instead minimize negative shareholder reactions by installing higher degrees of return convenience.