{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,1,13]],"date-time":"2026-01-13T00:38:35Z","timestamp":1768264715332,"version":"3.49.0"},"reference-count":63,"publisher":"Emerald","issue":"1","license":[{"start":{"date-parts":[[2024,8,12]],"date-time":"2024-08-12T00:00:00Z","timestamp":1723420800000},"content-version":"tdm","delay-in-days":0,"URL":"https:\/\/www.emerald.com\/insight\/site-policies"}],"content-domain":{"domain":[],"crossmark-restriction":false},"short-container-title":["MD"],"published-print":{"date-parts":[[2025,1,21]]},"abstract":"<jats:sec><jats:title content-type=\"abstract-subheading\">Purpose<\/jats:title><jats:p>This paper aims to highlight the role of the CEO\u2019s background in the stock market reaction to a product recall. Based on the upper echelons theory and the crisis management literature, we argue that the CEO\u2019s background influences the expected response in a product harm crisis and the updating of investors\u2019 expectations following a product recall announcement. We test if the CEO\u2019s background influences the abnormal stock market returns around product recalls and how it affects the way investors interpret the recall strategy and severity.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Design\/methodology\/approach<\/jats:title><jats:p>We use an event study, for a sample of 2,576 product recalls in the US automobile industry, between January 2010 and June 2021.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Findings<\/jats:title><jats:p>We observe that the stock market\u2019s reaction is less negative if the firm\u2019s CEO presents a core specialist background and for firms led by insider CEOs. This result is in line with our argument that in the presence of a crisis that requires operational and firm-specific knowledge, such as product recalls, the best alignment in terms of the CEO\u2019s background occurs when the CEO was recruited inside and is a core specialist. Finally, we also find that the CEO\u2019s background has a moderating effect on the impact of the recall strategy and severity on the stock market reaction to a recall announcement. In particular, a recall with high severity has a more negative stock market reaction when the CEO is a core specialist as such an event is not expected by the market.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Practical implications<\/jats:title><jats:p>These results have important implications for practitioners and scholars working in the areas of product quality and corporate governance. Given the high frequency and high costs for firms to carry out these operations in the automobile industry, we recommend a careful analysis of the CEO\u2019s background before their appointment as well as careful planning to prevent and to adequately react appropriately to product quality problems. While there is a common tendency among executives to cut discretionary expenditures such as spending on product safety, our results regarding the stock market reaction to product recall announcements suggest that investors expect firms led by insider and core specialist CEOs to be more likely to ensure product quality and to respond to product quality crisis.<\/jats:p><\/jats:sec><jats:sec><jats:title content-type=\"abstract-subheading\">Originality\/value<\/jats:title><jats:p>We extend knowledge of product recalls by studying the role of the CEO\u2019s background on the stock market reaction to product recall announcements.<\/jats:p><\/jats:sec>","DOI":"10.1108\/md-07-2023-1285","type":"journal-article","created":{"date-parts":[[2024,8,9]],"date-time":"2024-08-09T09:38:08Z","timestamp":1723196288000},"page":"283-306","source":"Crossref","is-referenced-by-count":2,"title":["How does CEO background affect stock market returns around product recall announcements? 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