What is it about?
Following Volkswagen's Dieselgate, more attention has turned to the environmental performance of auto manufacturers. Auto manufacturers have large investments in factories and make a big contribution to national economies. at the same time, their products and transport represent a large proportion of pollution and greenhouse gases. Governments impose environmental standards and the firms vie with strict self-imposed standards for marketing. In this competitive environment, what happens when firms are found to fail to meet these requirements? What is the investor perception and the possible consequences for the firm?
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Why is it important?
We demonstrate that Dieselgate and related cases of environmental failure represent a 1% loss of company value when investors react. Performance can be improved to an extent that it avoids this loss, giving managers a sense of how much investment might be made to avoid the risk associated with failing to meet environmental standards. We also show that in the wake of Dieselgate, investors have become more risk-averse to thees disruptions.
Perspectives
We enjoyed working on this research and hope that it drives home to consumers and executives just how important environmental regulations, standards, and marketing campaigns can be. We commonly think of 'safety failures' as 'big news' but these findings also show a strong sensitivity to the environmental performance of auto firms in addition to safety performance. This research is part of our work in explaining how effective operations management and product design can impact wider society.
Lincoln Wood
University of Otago
Read the Original
This page is a summary of: Stock Market Reactions to Auto Manufacturers’ Environmental Failures, Journal of Macromarketing, June 2018, SAGE Publications,
DOI: 10.1177/0276146718781915.
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