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The value of apology: Apologies impact on stock returns

Date

2014-08-27

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

Part Of

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DOI

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