Department of Economics

The impact of automobile recalls on stock prices hasn’t been investigated on a large scale since the 1980s. Based on a sample size of 201 recalls spanning from 1980 to 2016 in the United States, we investigate the impact of a recall on stock prices using event study methodology. We found that the automobile recall announcements generated statistically insignificant Average Cumulative Abnormal Returns (ACAR) in the main event windows (-5,5), (-2,2). Furthermore, we investigated whether the impact depends on overall market conditions, and found no significant difference in the ACAR generated by recalls during periods of economic expansion or recession.