Crisis management does not happen in a vacuum: Analysis of the influence of a company's contextual factors on the stock returns in times of organizational crises.

Details

Supervisors

Desmet, Carlos

Faculty

Louvain School of Management

Degree label

Master [120] en Ingénieur de gestion

Abstract

Organizations are facing more and more crises that could have been prevented and for which they are blamed. In the broad crisis management’s literature, the impact of a crisis has already been articulated with the type of the crisis or with the organization’s reaction. However, very few papers exist on the correlation between crisis impact and factors linked to the environment and the stakeholders of the organization. This paper therefore aims to bridge this gap by testing the role of contextual factors in explaining abnormal stock returns when a corporate crisis occurs. Four factors have been chosen: (1) the industry, which have been clustered into crisis-prone or non crisis-prone; (2) the relationship with the client, business-to-consumer or business-to-business; (3) the level of commitment to corporate social responsibility; (4) the national score on two cultural dimensions, individualism and uncertainty avoidance. The empirical investigation of the crisis impact on companies' stock returns was conducted through an event study in a short-term and a long-term perspective. The estimation of the normal returns was based on the 30 days prior to the event, and the aggregated abnormal returns were calculated over the event (day 1 to day 3) and post-event windows (day 4 to day 30).