The value of apology: Apologies impact on stock returns
Date
2014-08-27
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
ORCID
Type
Degree Level
Masters
Abstract
In a crisis managers are confronted with a dilemma between an ethical responsibility to respond to victims and their fiduciary responsibility to protect shareholder’s wealth. This study provides empirical evidence that a company apology made during a crisis can have a positive or negative effect on stock price depending on the level of responsibility for a crisis born by the firm. We use Coombs’ (2007) Situational Crisis Communication Theory to classify crises and appropriate re-sponse type for 235 unique crises between 1983 and 2013. We use event study methodology to study the effect of an apology on returns. The results show that managers apologizing to those affected for a victim or accidental crisis jeopardize shareholder wealth; however offering an apology for a preventable crisis offsets this negative effect.
Description
Keywords
Apology, Crisis Management, Event Study, Situational Crisis Communication Theory, Stock Market Reaction
Citation
Degree
Master of Science (M.Sc.)
Department
Finance
Program
Master of Science