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Firms and Collective Reputation: The Volkswagen Emission Scandal as a Case Study

Ruediger Bachmann (), Gabriel Ehrlich and Dimitrije Ruzic

No 6805, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper uses the 2015 Volkswagen emissions scandal as a natural experiment to provide causal evidence that group reputation externalities matter for firms. Our estimates show statistically and economically significant declines in the U.S. sales and stock returns of, as well as public sentiment towards, BMW, Mercedes-Benz, and Smart as a result of the Volkswagen scandal. In particular, the scandal reduced the sales of these non-Volkswagen German manufacturers by approximately 76,000 vehicles over the following year, leading to a loss of approximately $3.7 billion of revenue. Volkswagen’s malfeasance materially harmed the group reputation of “German car engineering” in the United States.

Keywords: automobiles; collective reputation; country reputation; difference-in-differences; event study; Google trends; firm reputation; natural experiment; reputation externalities; Twitter sentiment; Volkswagen emissions scandal (search for similar items in EconPapers)
JEL-codes: D12 D90 F23 L14 L62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env and nep-tre
Date: 2017
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