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The Causes and Consequences of Product Recalls

Title:

The Causes and Consequences of Product Recalls

zhang, shafu (2017) The Causes and Consequences of Product Recalls. PhD thesis, Concordia University.

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Abstract

For the chapter 2, I find that a CEO's characteristics will have direct impact on the occurrence of a firm's product recall. I also find that various corporate governances mechanisms can effectively mitigate/control the negative impact of CEO's characteristics on the likelihood of product recall events. For the chapter 3, I investigate the impact of PHC on firms' financial reporting policy. I find evidence that firms experiencing a product harm crisis engage in income-increasing earnings management, and the upward earning management is positively associated with the severity of the product harm crisis. Moreover, income-increasing earnings management is most prominent for crisis firms that produce durable goods, have industrial customers, and have CEOs who possess greater equity incentive and who are earlier in their tenure. Furthermore, upward earnings management helps firms retain major customers and reduces the propensity of a bonus cut and forced turnover for the CEO. For the chapter 4, I study debt market reaction to the announcements of recall firms. I find that banks charge 19% higher interest spreads on loans to recall firms after product recall announcements. In addition, banks monitor recall firms more closely by using tighter non-price terms I further find that the effects of product recall on debt contracting are more pronounced for firms with less independent board of directors, lower ex-ante ability to recover from product recalls, and with multiple product recalls. Taken as a whole, my findings suggest that banks, as informed stakeholders, generally perceive product recalls as a credit risk factor and react to this risk in debt contracting.

Divisions:Concordia University > John Molson School of Business > Accountancy
Item Type:Thesis (PhD)
Authors:zhang, shafu
Institution:Concordia University
Degree Name:Ph. D.
Program:Business Administration (Accountancy specialization)
Date:30 December 2017
Thesis Supervisor(s):Magnan, Michel
ID Code:983549
Deposited By: SHAFU ZHANG
Deposited On:05 Jun 2018 14:36
Last Modified:05 Jun 2018 14:36
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