Do Vehicle Manufacturers Procrastinate Recall Issuance When Defects Are Riskier?

This paper analyzes the factors determining vehicle manufacturers‘ recall decisions. Since the purpose of recall regulation is to remove vehicles with unreasonably risky defects from the road, the success of the regulation is dependent on whether it can effectively eliminate the risks and improve public safety. To make this possible, manufacturers should recall defective vehicles as quickly as possible if the defects are proven to be harmful. Thus, we test if manufacturers issue recalls more swiftly or slowly when defects are riskier. For the empirical test, we use zero-truncated negative binomial models. Our results suggest that manufacturers are more likely to procrastinate their recall issuance when defects are more hazardous, making recall regulation less effective. Therefore, we urge the regulatory agency to investigate the defects and warn manufacturers to issue recalls if procrastination occurs despite potentially risky defects.