Handbook of Marketing and Finance
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Handbook of Marketing and Finance

Edited by Shankar Ganesan

Many organizations have found that the value to business operations and financial performance created by the marketing function has become very important. The need to demonstrate this importance has also become clear. Top managers are constantly challenging marketers to document marketing’s contribution to the bottom-line and link marketing investments and assets to metrics that matter to them. This Handbook relates marketing actions to various types of risk and return metrics that are typically used in the domain of finance. It provides current knowledge of this marketing-finance interface in a single, authoritative volume and brings together new cutting-edge research by established marketing scholars on a range of topics in the area.
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Chapter 12: Product-harm Crisis Management and Firm Value

Yong Liu, Yubo Chen and Shankar Ganesan


Yong Liu, Yubo Chen, Shankar Ganesan and Ronald Hess INTRODUCTION Product-harm crisis occurs when a product fails to meet a mandatory safety standard, contains a defect that could cause substantial harm to consumers, creates an unreasonable risk of serious injury or death, or fails to comply with a voluntary standard adopted by the specific industry (Mullan, 2004). As one of the most damaging incidents that the firms have to cope with, product-harm crises span a wide variety of product categories and, once occurred, usually cause a significant amount of media attention, policy scrutiny, and public outcry. Many of the crises have led to well-publicized product recalls. For example, Bridgestone Corporation of Japan recalled 6.5 million Firestone brand tires on 7 August, 2000, which were reportedly exhibiting tendencies to come apart at high speed, causing vehicles to roll over (Govindaraj et al., 2004). In 2007, Mattel issued more than ten toy recalls for problems such as lead paint hazard and the magnets being too small and likely to detach from the toy. From the end of 2009 to early 2010, Toyota, a company that has been long acclaimed for product quality, was involved in three major recalls involving floor mats and accelerator pedals. Unfortunately, some of the recalls were issued after serious injuries and/or death to consumers. As an example, Playskool recalled about 255 000 of its Tool Bench toys only after receiving the death reports of two toddlers (CPSC, 2006). The consequences of product-harm crisis are multidimensional. In general, firms...

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