Spillover Effects from the Volkswagen Emissions Scandal: An Analysis of Stock and Corporate Bond Markets

Florian Barth (), Christian Eckert (), Nadine Gatzert () and Hendrik Scholz ()
Additional contact information
Florian Barth: Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU)
Christian Eckert: Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU)
Nadine Gatzert: Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU)
Hendrik Scholz: Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU)

Schmalenbach Journal of Business Research, 2022, vol. 74, issue 1, 37-76

Abstract: Abstract This study examines spillover effects following Volkswagen’s admission of emissions cheating. We first estimate initial operational losses of 8.45% of Volkswagen’s equity market capitalization on the date before the announcement, reputational losses up to five times these losses, and significant negative shocks to its stocks and bonds. Analyzing spillover effects from this shock beyond the usually only measured losses in equity value, we find significant negative net spillover effects to European competitors and suppliers in both stock and bond markets. Studying the economic effects in more detail, we show that Volkswagen’s total losses of 27.4 billion euros in terms of changes in equity market values over the first five event days are almost entirely composed of abnormal losses. Furthermore, competitors (suppliers) overall suffered 18.3 (12.6) billion euros of abnormal losses during this time, with 60% (69%) of the firms exhibiting negative changes, especially European competitors and suppliers connected to Volkswagen. These figures are further increased by negative bond market value changes. Overall, our results strongly emphasize that neglecting debt holders losses can lead to an underestimation of such events.

Keywords: Spillover effects; Volkswagen emissions scandal; Event study; Operational risk (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s41471-021-00121-9 Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sjobre:v:74:y:2022:i:1:d:10.1007_s41471-021-00121-9

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/41471

DOI: 10.1007/s41471-021-00121-9

Access Statistics for this article

More articles in Schmalenbach Journal of Business Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().