While emphasis is naturally placed on stock price reaction given the traditionally-held imperative to strive for maximal shareholder value, other factors contribute to this value proposition. When responding to a crisis, senior management generally emphasizes the goal of maintaining shareholder value. Corporate crises, especially when combined with greater publicity around those crises, can spur or change the strategic management decisions within organizations (Hurley-Hanson & Giannantonio, 2009). The automobile industry is particularly prone to recalls, and the number of recall events is generally increasing in the face of intra-industry competition, faster time-to-market, and additional complexity in supply chain and component procurement (Bates, Holweg, Lewis, & Oliver, 2007). Therefore, careful consideration must be paid to crafting corporate strategy following recall events (e.g., Peng & Chen, 2011). Given the globalization of manufacturing and the close monitoring of product quality by consumers, firms, and government agencies, product recalls and their associated negative financial impacts have become nearly inevitable for any manufacturer (Berman, 1999 Dawar & Pillutla, 2000 Bapuji, 2011).
Preparing for and responding to corporate crises has become a fundamental imperative for corporations.
