Product and Stock Market Responses to Automotive Product Liability Verdicts

Garber, Steven; Adams, John L.; Peltzman, Sam; Rubinfeld, Daniel L.

doi:10.2307/2534799

Cited by 17 publications

(15 citation statements)

References 37 publications

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“…Moreover, it does not emerge any negative or positive externality on other firms in the industry. Garber and Adams (1998) find that product liability verdicts against automobile producers in US have a weak impact on the value of the firm and on product sales, probably because the verdicts carry little new information to consumers (since relevant information has already been revealed before the verdict). On the other hand, Prince and Rubin (2002) examine the effects of product liability litigation on firms in the automobile and pharmaceutical industries, focusing on the initial announcement of a liability problem.…”

Section: Introductionmentioning

confidence: 94%

Consumers’ Reactions to Negative Information on Product Quality: Evidence from Scanner Data

Paola

Scoppa

2013

Rev Ind Organ

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We analyze consumers' reactions to negative information on product quality using daily scanner data at item level from a well-known supermarket chain. We focus on a fraud that in 2008 has involved a number of Italian leading firms in the cheese sector. Exploiting the fact that only some brands were mentioned by the media as being involved in the fraud, we adopt a difference-indifferences estimation strategy and evaluate the effects of the negative media coverage comparing changes in sales for involved and for not involved brands. It emerges that the negative news on product quality have induced consumers to shift their demand from involved to not involved brands. These effects persist overtime, also once the media was no more giving attention to the issue. Retailers have suffered part of the costs deriving from the diffusion of bad news on product quality: the margin gained on brands directly mentioned by media has decreased after the negative publicity.

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Section: Introductionmentioning

confidence: 94%

Consumers’ Reactions to Negative Information on Product Quality: Evidence from Scanner Data

Paola

Scoppa

2013

Rev Ind Organ

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“…Most of these studies use litigation as an indicator of negligence; we will do the same. Garber and Adams (1998) examine the effect of product liability trial verdicts on sales of new automobiles and on the stock price of automotive firms. They find no effect of these verdicts on sales or stock prices, which leads them to conclude that consumers are either unaware of the verdicts or do not use the information to update their beliefs about auto quality.…”

Section: Introductionmentioning

confidence: 99%

Delivering Bad News: Market Responses to Negligence

Dranove¹,

Ramanarayanan²,

Watanabe³

2012

The Journal of Law and Economics

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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. AbstractOne of the goals of the legal liability system is to ensure that sellers provide appropriate care. Reputation effects may also deter negligence. The little available research evidence suggests that reputation effects are minimal, however. We develop a theory tailored to an environment, such as medicine, in which sellers are of heterogeneous quality and face two types of demand-private consumers who exhibit downward-sloping demand (for example, private health insurance) and government consumers who exhibit perfectly elastic demand at a fixed price (for example, Medicaid insurance). The theory predicts that high-quality sellers who suffer reputation losses will see their caseloads shift from private to government patients, while low-quality sellers will lose government patients and may gain private patients. Combining individual patient-level data from Florida for the years 1994-2003 with physician-level litigation data, we find evidence that physicians experience reputation effects that are consistent with the theory.

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“…For example, the effect of recalls of various types of products on the stock market has been analyzed by several authors: Jarrell and Peltzman (1985) examine recalls of drugs and automobiles in the United States, Rupp (2001) looks at automotive recalls in the United States, Barber and Darrough (1996) investigate automotive recalls of American and Japanese automakers in the United States, and Wang et al (2002) focus on food recalls. In addition, the impact of automotive PL verdicts on new-vehicle sales is examined by Garber and Adams (1998).…”

Section: Introductionmentioning

confidence: 99%

Product Defects and the Value of the Firm in Japan: The Impact of the Product Liability Law

Takaoka¹

2006

The Journal of Legal Studies

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This paper examines the stock market response of firms in the automobile, food, and pharmaceutical industries to various events during the August 1993–July 1994 period that led to the enactment of the product liability law in Japan. This paper also explores the economic determinants of the magnitude of the impact of legislative events on the value of the firm. The legislative events considered include the initial proposal of the bill, committee approval, approval in each house, and so on. It is found that the most significant market response occurred around the time when the revision requests from the relevant ministries were adopted and that events generally led to losses in the value of the firm. It is also found that firm size is a significant determinant of market response.

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Product and Stock Market Responses to Automotive Product Liability Verdicts

Cited by 17 publications

References 37 publications

Consumers’ Reactions to Negative Information on Product Quality: Evidence from Scanner Data

Consumers’ Reactions to Negative Information on Product Quality: Evidence from Scanner Data

Delivering Bad News: Market Responses to Negligence

Product Defects and the Value of the Firm in Japan: The Impact of the Product Liability Law

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