Product recall as a way of responsible management of a firm: The roles of corporate social responsibility and board members' sense of ownership

Abstract

This paper employs a new perspective for viewing product recall as a way to responsibly manage a firm with a record of corporate social responsibility (CSR) engagement. Firms known for their past CSR performance are assumed to be responsible in recalling defective products when a product-harm crisis occurs. We examine whether the cumulated CSR efforts increase the likelihood of engaging in a voluntary product recall. To further reinforce the perspective, we examine whether the relationship still holds under performance pressure. In addition, this study examines the moderating effect of board characteristics that give a sense of ownership to board members (e.g., a family member of a founder, holding block shares, and voting power) in increasing socially responsible firms' engagement in the voluntary recall. The hypotheses were tested using a sample of 592 public firms in the United States from 2001 to 2014. © 2019 John Wiley & Sons, Ltd and ERP Environment