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Learning About Product Quality: Automotive Recalls and Country Reputations

Authors: Andrew N. Greenland;

Learning About Product Quality: Automotive Recalls and Country Reputations

Abstract

Prior studies have argued that quality uncertainty for experience goods may be in part resolved by firm-specific reputational assets. This paper demonstrates that unobserved quality may also be signaled by a reputational asset common to many firms – country of origin. Analyzing stock market reactions to all published automotive recalls in the U.S. from 1966-2011, I find evidence that consumers learn about product quality both through historic experience with firms and country of origin. I estimate that firms whose products are recalled initially experience abnormal returns of −0.6%, and that these abnormal returns diminish with each subsequent recall. Further, I find significant intra-country spillovers of −0.15% during recall announcements. These results have implications for firms’ willingness to invest in quality and may lend insight into the perceived country-specific quality observed in the automotive industry.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
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