IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v49y2013i1p24-32.html
   My bibliography  Save this article

Financial condition, safety investment and accident propensity in the US airline industry: A structural analysis

Author

Listed:
  • Wang, Zuozheng
  • Hofer, Christian
  • Dresner, Martin E.

Abstract

Previous research has used reduced-form models to determine the impact of financial condition and safety investment on airline accident risk and has found limited statistical evidence. We model safety investment as a mediating variable between the financial health of an airline and its accident propensity and simultaneously account for the reverse effects of accident propensity on safety investment. Compared with prior research, our structural model yields stronger results. Specifically, we find that safety investment reduces accident propensity, while the reverse effect is also significant. However, financial condition does not appear to affect safety investment or accident propensity.

Suggested Citation

  • Wang, Zuozheng & Hofer, Christian & Dresner, Martin E., 2013. "Financial condition, safety investment and accident propensity in the US airline industry: A structural analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 24-32.
    • Handle: RePEc:eee:transe:v:49:y:2013:i:1:p:24-32
    DOI: 10.1016/j.tre.2012.07.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554512000634
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tre.2012.07.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Golbe, Devra L, 1986. "Safety and Profits in the Airline Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 305-318, March.
    2. Dionne, Georges & Gagne, Robert & Gagnon, Francois & Vanasse, Charles, 1997. "Debt, moral hazard and airline safety An empirical evidence," Journal of Econometrics, Elsevier, vol. 79(2), pages 379-402, August.
    3. Christian Hofer & Martin Dresner & Robert Windle, 2005. "Financial Distress and US Airline Fares," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 323-340, September.
    4. Windmeijer, F A G & Silva, J M C Santos, 1997. "Endogeneity in Count Data Models: An Application to Demand for Health Care," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 281-294, May-June.
    5. Rainer Winkelmann, 2008. "Econometric Analysis of Count Data," Springer Books, Springer, edition 0, number 978-3-540-78389-3, October.
    6. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-938, July.
    7. Mitchell, Mark L & Maloney, Michael T, 1989. "Crisis in the Cockpit? The Role of Market Forces in Promoting Air Travel Safety," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 329-355, October.
    8. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    9. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
    10. Hofer, Christian & Dresner, Martin E. & Windle, Robert J., 2009. "The impact of airline financial distress on US air fares: A contingency approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 45(1), pages 238-249, January.
    11. Borenstein, Severin & Zimmerman, Martin B, 1988. "Market Incentives for Safe Commercial Airline Operation," American Economic Review, American Economic Association, vol. 78(5), pages 913-935, December.
    12. McFadden, K. L., 1996. "Comparing pilot-error accident rates of male and female airline pilots," Omega, Elsevier, vol. 24(4), pages 443-450, August.
    13. Nancy L. Rose, 1992. "Fear of Flying? Economic Analysis of Airline Safety," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 75-94, Spring.
    14. Gregory Noronha & Vijay Singal, 2004. "Financial health and airline safety," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(1), pages 1-16.
    15. Rose, Nancy L, 1990. "Profitability and Product Quality: Economic Determinants of Airline Safety Performance," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 944-964, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pérez-Granja, Ubay & Pérez-Sánchez, José María & Pérez-Rodríguez, Jorge V., 2024. "Assessing economic performance and aviation accidents using zero-inflated and over-dispersed panel data models," Journal of Air Transport Management, Elsevier, vol. 118(C).
    2. Corbet, Shaen & Efthymiou, Marina & Lucey, Brian & O'Connell, John F., 2021. "When lightning strikes twice: The tragedy-induced demise and attempted corporate resuscitation of Malaysia airlines," Annals of Tourism Research, Elsevier, vol. 87(C).
    3. Lee, Kangoh, 2023. "Airline operational disruptions and loss-reduction investment," Transportation Research Part B: Methodological, Elsevier, vol. 177(C).
    4. Dalia Streimikiene & Kristina Lasickaite & Marinko Skare & Grigorios Kyriakopoulos & Rimantas Dapkus & Pham Anh Duc, 2021. "The impact of Corporate Social Responsibility on Corporate Image: Evidence of budget airlines in Europe," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(2), pages 925-935, March.
    5. Ren, Junqiushi, 2023. "Financial conditions and incumbent quality responses to entry: Evidence from airlines' on-time performance," Journal of Air Transport Management, Elsevier, vol. 107(C).
    6. Dariusz Tworzydło & Sławomir Gawroński & Agata Opolska‐Bielańska & Mateusz Lach, 2022. "Changes in the demand for CSR activities and stakeholder engagement based on research conducted among public relations specialists in Poland, with consideration of the SARS‐COV‐2 pandemic," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(1), pages 135-145, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dionne, Georges & Gagne, Robert & Gagnon, Francois & Vanasse, Charles, 1997. "Debt, moral hazard and airline safety An empirical evidence," Journal of Econometrics, Elsevier, vol. 79(2), pages 379-402, August.
    2. Pérez-Granja, Ubay & Pérez-Sánchez, José María & Pérez-Rodríguez, Jorge V., 2024. "Assessing economic performance and aviation accidents using zero-inflated and over-dispersed panel data models," Journal of Air Transport Management, Elsevier, vol. 118(C).
    3. Akyildirim, Erdinc & Corbet, Shaen & O'Connell, John F. & Sensoy, Ahmet, 2021. "The influence of aviation disasters on engine manufacturers: An analysis of financial and reputational contagion risks," International Review of Financial Analysis, Elsevier, vol. 74(C).
    4. Raghavan, Sunder & Rhoades, Dawna L., 2005. "Revisiting the relationship between profitability and air carrier safety in the US airline industry," Journal of Air Transport Management, Elsevier, vol. 11(4), pages 283-290.
    5. Peter Madsen & Robin L. Dillon & Catherine H. Tinsley, 2016. "Airline Safety Improvement Through Experience with Near‐Misses: A Cautionary Tale," Risk Analysis, John Wiley & Sons, vol. 36(5), pages 1054-1066, May.
    6. Chang, Yu-Hern & Yeh, Chung-Hsing, 2004. "A new airline safety index," Transportation Research Part B: Methodological, Elsevier, vol. 38(4), pages 369-383, May.
    7. Nancy L. Rose, 1992. "Fear of Flying? Economic Analysis of Airline Safety," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 75-94, Spring.
    8. Randall K. Filer & Devra L. Golbe, 2003. "Debt, Operating Margin, and Investment In Workplace Safety," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 359-381, September.
    9. Kaplanski, Guy & Levy, Haim, 2010. "Sentiment and stock prices: The case of aviation disasters," Journal of Financial Economics, Elsevier, vol. 95(2), pages 174-201, February.
    10. Ren, Junqiushi, 2023. "Financial conditions and incumbent quality responses to entry: Evidence from airlines' on-time performance," Journal of Air Transport Management, Elsevier, vol. 107(C).
    11. Maria Ángeles Alcaide & Alberto Celani & Paula Cervera Chasan & Elena De La Poza, 2022. "Mathematical Modeling of the Financial Impact of Air Crashes on Airlines and Involved Manufacturers," Mathematics, MDPI, vol. 10(5), pages 1-18, February.
    12. Oster, Clinton V. & Strong, John S. & Zorn, C. Kurt, 2013. "Analyzing aviation safety: Problems, challenges, opportunities," Research in Transportation Economics, Elsevier, vol. 43(1), pages 148-164.
    13. Gordon Phillips & Giorgo Sertsios, 2013. "How Do Firm Financial Conditions Affect Product Quality and Pricing?," Management Science, INFORMS, vol. 59(8), pages 1764-1782, August.
    14. Squalli, Jay, 2009. "Restorative advertising in the airline sector," Journal of Air Transport Management, Elsevier, vol. 15(1), pages 47-51.
    15. Mello, Marco & Moscelli, Giuseppe, 2022. "Voting, contagion and the trade-off between public health and political rights: Quasi-experimental evidence from the Italian 2020 polls," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1025-1052.
    16. Ito, Harumi & Lee, Darin, 2005. "Assessing the impact of the September 11 terrorist attacks on U.S. airline demand," Journal of Economics and Business, Elsevier, vol. 57(1), pages 75-95.
    17. Fox, Sarah, 2014. "Safety and security: The influence of 9/11 to the EU framework for air carriers and aircraft operators," Research in Transportation Economics, Elsevier, vol. 45(C), pages 24-33.
    18. Dionne, Georges & Artis, Manuel & Guillen, Montserrat, 1996. "Count data models for a credit scoring system," Journal of Empirical Finance, Elsevier, vol. 3(3), pages 303-325, September.
    19. Walker, Thomas John & Walker, Marcus Glenn & Thiengtham, Dolruedee Nuttanontra & Pukthuanthong, Kuntara, 2014. "The role of aviation laws and legal liability in aviation disasters: A financial market perspective," International Review of Law and Economics, Elsevier, vol. 37(C), pages 51-65.
    20. Earnhart, Dietrich & Segerson, Kathleen, 2012. "The influence of financial status on the effectiveness of environmental enforcement," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 670-684.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:49:y:2013:i:1:p:24-32. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.