Brands in Crises: Consumer and Investor Reponses
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Uzunogullari, Merve A.
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Abstract
Crises happen more frequently than ever. Chapter 1 explores how consumers respond to brand crises. Prior research discusses strategies that a brand may use to respond to a crisis arising from a transgression associated with the brand. When a brand uses these strategies (e.g., compensating affected parties, offering apologies), it implicitly or explicitly acknowledges its responsibility for a transgression. In many instances, however, a brand may want to deny responsibility for a transgression. For instance, if a brand’s supplier rather than the brand engaged in unethical labor practices, the brand could claim that it is not responsible for the transgression. Across four experimental studies, I find that a brand’s denial of responsibility leads to lower brand evaluations. Consumers view a brand’s denial of responsibility as morally unacceptable, even when the brand’s supplier rather than brand engaged in a transgression. The negative effect of denials on brand evaluations are moderated by consumers’ political orientations and a brand’s prior social behavior. Specifically, the negative effect is stronger among liberal consumers as compared to conservative consumers for values-related crises (but not for performance-related crises). In addition, a brand’s prior social behaviors raise consumer expectations of moral behavior from the brand more than they provide the brand a moral license for future transgressions. In Chapter 2, I investigate how investors react to firm’s decisions related to product recalls. Prior research demonstrates that investors react to timing of recalls and investigation durations (Astvansh and Eshghi 2023; Eilert et al. 2017). However, I study resolution dormancy, which I define as the time elapsed between when a recall is officially issued (either voluntarily or involuntarily) and when consumers are notified. During the dormancy period, manufacturers can prepare for the recall and manage their costs. I explore how investors respond to dormancy periods depending on the type of CSR. Utilizing data from the National Highway Traffic and Safety Administration and CSRHub, this research examines automotive recalls between 2009 and 2019. I find that investors respond negatively to dormancy periods when the manufacturer has high philanthropic CSR, as the manufacturer may not signal resource efficiency. Findings of this research provide a different perspective on understanding investor reactions to automobile product recalls.
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2024-10-08
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Dissertation (PhD)