The Social Cost of Strategic Disclosure Timing: Evidence from Vehicle Safety Recalls

61 Pages Posted: 5 Feb 2018 Last revised: 2 Mar 2021

See all articles by Jin Xie

Jin Xie

The Chinese University of Hong Kong (CUHK)

Date Written: March 2, 2021

Abstract

Vehicle firms strategically delay large-scaled, safety-related recalls to refinance their historically issued long-term debt prescheduled to mature by the end of the fiscal year in which manufacturing commences. The results are not driven by firms being differentially informed about defects because manufacturing starts at different time points. The effect of maturing debt on recall delay is economically large, strikingly robust to a broad array of checks, and survives from a difference-in-differences design. NHTSA does not time investigations based on corporate debt maturity structure. Firms' self-reported event chronologies to the NHTSA are consistent with their recall timing strategies.

Keywords: Vehicle safety recalls, Corporate debt maturity, Consumer safety, NHTSA, Safety regulation

JEL Classification: K20, G32, G33, R41

Suggested Citation

Xie, Jin, The Social Cost of Strategic Disclosure Timing: Evidence from Vehicle Safety Recalls (March 2, 2021). Available at SSRN: https://ssrn.com/abstract=3109409 or http://dx.doi.org/10.2139/ssrn.3109409

Jin Xie (Contact Author)

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

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