Select Page

Publicly-listed US companies that experienced a significant crisis lost an average of 15% of their stock value over the period of a year, according to a new study [download page] by Hot Paper Lantern. But the speed and effectiveness of a company’s response makes a significant difference to the outcome over 12 months.

Given that today’s consumers want brands to be transparent, responding to a PR crisis within hours as opposed to days appears to make a substantial difference. The companies analyzed that responded within hours typically experienced a lesser 4% decline in stock price value. But those that responded within days saw a 10% decline, while waiting weeks resulted in a 14% fall.

However, speed is not the sole factor. Effectiveness – as measured by the impact on sentiment across media articles and social media mentions – appears to be more important in the long term. Companies that responded within hours, but did so ineffectively, saw a 1% uplift in stock price. By comparison, those that responded within several weeks but did so effectively saw a 9% stock price rise.

Looking solely at effectiveness illustrates that the difference is even more pronounced. On a 1-year timescale, companies with ineffective responses lost almost 21% of their value over a year, but those with an effective response actually experienced a 6% rise. While this gap shrinks after 2 years (-14% ineffective, 0% effective), it is still pronounced.

Overall, 4 in 10 (41%) organizations were determined to have had an effective response, with the remainder (59%) being classified as ineffective.

One other finding that CEOs may be relieved to hear is that while a resignation has a positive impact in the short term (stock prices up 1% a month post-crisis), there is a negative impact long term, with values down by 12% after the event.

The report can be downloaded here.

About the Data: Figures are based on an analysis of 80 companies’ response to 105 crisis, measured by analysis of 450,000 media articles and 85,000 social mentions.

Feel Like You're Always Playing Catchup?

Stay ahead of the curve with our free newsletter. It’s fast. It’s factual. And it’s clear

marketing charts logo

Error: Please enter a valid email address

Error: Invalid email

Error: Please enter your first name

Error: Please enter your last name

Error: Please enter a username

Error: Please enter a password

Error: Please confirm your password

Error: Password and password confirmation do not match