When a crisis strikes, investor reactions can be swift and brutal. On average, share prices plummet by 35.2% after a corporate disaster. In fact, 33 companies studied did not survive the incident and were delisted due to bankruptcy, acquisition, privatisation, or government takeovers.

In the worst-case scenario, American International Group (AIG) saw a 97% collapse after its high exposure to mortgage-backed securities triggered a federal bailout.

This is according to the Crisis Index 300 which was developed by reputation, change and engagement consultancy SenateSHJ, in collaboration with expert data scientists. The study tracked over 300 crises spanning 27 stock exchanges and 32 industry sectors worldwide over the past 40 years.

The Crisis Index 300 reveals that, on average, corporate crises result in a 68.6% drop in earnings per share (EPS), wiping out billions in shareholder value overnight. The most extreme example is the Takata Corporation with an EPS collapse of 4,530% because of defective airbag inflators that could explode when deployed. Following years of airbag recalls and multiple related deaths, Takata filed for bankruptcy in Japan and the U.S. in June 2017.

For companies lucky enough to recover, the road is long and uncertain. On average, it took 425 days for businesses’ share price to return to pre-crisis levels. For some, recovery took years – or never happened at all.

For example, Freddie Mac and Fannie Mae were at the centre of the U.S. housing market collapse in 2008 amd saw EPS drops of 1,484% and 1,120%, respectively. These two crises involved a combination of excessive risk-taking in subprime mortgages, an over-reliance on housing market growth, inflated balance sheets with risky loans, and misaligned incentives due to private profits and public backing. It was the perfect storm and when the housing bubble burst, both crashed to near insolvency, said SenateSHJ. It took the companies 3,650 days, or about 10 years, to bounce back from this. 

In fact, for companies lucky enough to recover, the road is long and uncertain. On average, it took 425 days for businesses’ share price to return to pre-crisis levels. 121 companies studied never recovered or have not yet recovered.

For example, BlackBerry failed to adapt to rapidly changing consumer preferences and competition from Apple and Android-based phones, hanging onto physical keyboards while the market moved rapidly to touchscreens.

Much like the famous Kodak and Blockbuster case studies, this is another case of management overconfidence, a failure to anticipate consumer demand and trends, and a company bereft of strategy in the face of industry disruption, according to SenateSHJ. It led to a huge drop in market share and brand relevance and took about 4,902 days, or 13.4 years to recover.

Some industries appear particularly vulnerable to extreme financial impacts. The telecommunications sector for example suffered more than others with share prices plummeting by an average of 64.3%.

The energy sector (55.7%) and banking (37%) were also badly impacted. The banking, financial services and insurance sector endured severe EPS declines at 106.4%.


The nature of the crisis also plays a significant role in financial impact. Mismanagement, white-collar crime, and environmental damage resulted in the steepest share price losses with mismanagement resulting in a 47.2% share price drop and a 57.8% EPS decline. Workplace violence though results in the worst EPS impact decline at 149.2%.