Celebrity Endorsements, Firm Value, and Reputation Risk: Evidence from the Tiger Woods Scandal

Christopher Knittel and Victor Stango ()
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Victor Stango: Graduate School of Management, University of California, Davis, Davis, California 95616

Management Science, 2014, vol. 60, issue 1, 21-37

Abstract: We estimate the stock market effects of the Tiger Woods scandal on his sponsors and sponsors' competitors. In the 10--15 trading days after the onset of the scandal, the full portfolio of sponsors lost more than 2% of market value, with losses concentrated among the core three sponsors: Electronic Arts, Nike, and PepsiCo (Gatorade). Sponsors' day-by-day losses correlate strongly with Google search intensity regarding the endorsement-related impact of the scandal, as well as with qualitative indicators of “endorsement-related news.” At least some sponsors' losses were competitors' gains, suggesting that endorsement deals are partially a business-stealing strategy. However, competitors who were themselves celebrity endorsement intensive fared relatively worse than those who were not endorsement intensive, and that difference also correlates day by day with news/search intensity regarding the scandal. It appears that the scandal sent a negative marketwide signal about the reputation risk associated with celebrity endorsements. This paper was accepted by Pradeep Chintagunta, marketing.

Keywords: celebrity endorsers; event studies; reputation risk (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:60:y:2014:i:1:p:21-37

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