Product Recall and CEO Compensation: Evidence from the Automobile Industry

Document Type

Peer-Reviewed Article

Publication Date

6-2023

Abstract

This study examines the association between product recall and CEO compensation. Using a sample of U.S. automobile industry product recalls from 1999 to 2018, we find that product recalls have significant negative impacts on CEO compensation. Our findings hold after controlling for the common determinants of CEO compensation, such as firms’ stock market and operating performance and CEO-specific characteristics. An additional analysis shows that CEOs’ total and long-term compensation decreases with the number of recalls. However, we find no association between CEOs’ cash compensation and product recalls.

DOI

10.1016/j.frl.2023.103815

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