Is Time of the Essence? Examining the Impact of Time-to-Owner Notification of Remedies and Dealership Network Size on Automotive Recall Effectiveness

Despite the recalls issued, millions of vehicles on the road have open recalls. Vehicles with open recalls pose a threat to drivers, passengers, and other motorists. While research suggests that fast recalls may not be in the best interests of the affected firms and their shareholders, the authors assess whether more prompt notification of recall remedies helps with recall effectiveness (recall completion ratio), which is beneficial to consumers. Additionally, this study examines whether dealership network size, which affects customer access to recalls and their execution, directly and jointly with the time to notify vehicle owners of recall remedies, impacts recall effectiveness. This study uses 1221 unique automotive recalls and a two-stage least squares (2SLS) estimation approach to test the proposed hypotheses and conduct robustness checks to corroborate the study's findings. The authors observe that prompt notification of recall remedies enhances the recall completion ratio. Additionally, a larger dealership network contributes positively toward improving the recall completion ratio. However, the beneficial impact of a larger dealership network on the recall completion ratio diminishes when remedy notifications to vehicle owners are protracted.