Guilt through association: Reputational contagion and the Boeing 737-MAX disasters

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Abstract

The unfortunate set of circumstances surrounding the loss of both Lion Air Flight 610 and Ethiopian Airlines Flight 302 led to the immediate grounding of the advertised ‘incredibly fuel-efficient’ Boeing 737-MAX. The side-effects of the decision to ground such flights led to delays and cancellation of orders. Companies with entire Boeing fleets and a heavy reliance on the proposed cost-savings in an ultra-competitive industry thereby made their shareholders aware that identified future revenue generation was now on hold indefinitely. Results indicate that investors identified this reliance, but also, the subsequent negative polarity and subjectivity of social media response is found to have significantly influenced the share price of airlines with no fleet diversification, and subsequently, no reputational diversification.

Original languageEnglish
Article number109657
JournalEconomics Letters
Volume198
Early online date12 Nov 2020
DOIs
Publication statusE-pub ahead of print - 12 Nov 2020

Keywords

  • 737-MAX
  • Aviation disaster
  • Boeing
  • Financial crisis
  • Sentiment

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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