The Influence of Outside Directors and Whistleblowing on Product Recall in the Automobile Industry

Abstract

Swiftly submitting a product recall notification reduces subsequent damage. This study demonstrates the influence of outside directors and whistleblowing on such submission. We use 111 notifications from 15 automobile industry firms in Japan in fiscal year 2019. Multivariate analysis shows that a high ratio of outside directors and frequency of whistleblowing have a negative effect on notification submission. We also examine the interaction effect between the outside director ratio and whistleblowing. The analysis reveals that outside directors have a positive effect on submission when whistleblowing occurs frequently, but otherwise have a negative effect. This study makes a theoretical contribution to top management team research and a practical contribution by proposing an effective outside director ratio and whistleblowing system.