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

2020; Elsevier BV; Volume: 198; Linguagem: Inglês

10.1016/j.econlet.2020.109657

1873-7374

Iulia Cioroianu, Shaen Corbet, Charles Larkin,

COVID-19 Pandemic Impacts

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.