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Do CEO Characteristics Matter in Product Recalls?

Author

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  • António Miguel Martins
  • Cesaltina Pacheco Pires

Abstract

This study examines the effect of CEO characteristics such as gender, age, tenure, functional background, stock ownership, compensation scheme and dual role on the stock market returns of automobile companies, around the announcement of product recalls. Using an event study, for a sample of 2,576 product recalls in the US automobile industry, between January 2010 and June 2021, we observe that the stock market’s reaction to a product recall announcement is negative. However, the impacts on the cumulative abnormal returns around the announcement of product recalls of the company’s CEO being female, the CEO tenure, the CEO having an operations or marketing background, the ratio of CEO long-term compensation to total compensation and the CEO and Chairperson being the same person are all positive and statistically significant, showing that these CEO characteristics mitigate the negative effects on a company’s financial value caused by product recalls.

Suggested Citation

  • António Miguel Martins & Cesaltina Pacheco Pires, 2023. "Do CEO Characteristics Matter in Product Recalls?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 30(3), pages 207-232, September.
    • Handle: RePEc:taf:ijecbs:v:30:y:2023:i:3:p:207-232
    DOI: 10.1080/13571516.2023.2213127
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