The impact of failed PR crisis management on the stock return within three months

Abstract

This research focuses on the impact of bad strategies the company used when the public crisis happened on the stock return changes within three months. The study aims to find whether the negative PR strategies really influent the company stock return. To find whether the stock return will fluctuate when something happened in the real world, I decide to use the event study model and Capital Asset Pricing Model to do the analysis. Through these two methods, we can know whether the event will affect the stock return or not. In these research method model, we need to use CAPM model to calculate the expected stock price if the events didn’t happen. I decide to set the estimation window as 2 months (60 days) before the events happen. Next, as the event study pays attention to the abnormal returns during the event time, this is an important part of the whole research. The abnormal rate of return is the difference between the actual rate of return during the event and the expected normal rate of return in the absence of the event. After a series of data analysis, we will have a chart to illustrate whether the price gap exist.