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When a celebrity endorser is disgraced: A twenty-five-year event study

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Author Info

  • Sherry Bartz

    ()

  • Alexander Molchanov

    ()

  • Philip Stork

Abstract

This paper investigates how the announcement of negative information about a celebrity endorser impacts firm value, as measured by abnormal stock returns. The unique data sample consists of 93 celebrity disgraces that occurred between 1986 and 2011, affecting firms listed on US stock exchanges. Some evidence is documented of negative and statistically significant abnormal returns around these events. Returns are lower when the disgrace attracts much media attention, or when the celebrity itself is prominent. No significant returns are observed when a firm decides to terminate its endorsement contract with the disgraced celebrity. Endorsement contracts for “edgy” products, for which consumers may actually be attracted by negative publicity, are less likely to be terminated. Copyright Springer Science+Business Media New York 2013

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File URL: http://hdl.handle.net/10.1007/s11002-013-9229-2
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Bibliographic Info

Article provided by Springer in its journal Marketing Letters.

Volume (Year): 24 (2013)
Issue (Month): 2 (June)
Pages: 131-141

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Handle: RePEc:kap:mktlet:v:24:y:2013:i:2:p:131-141

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Web page: http://www.springerlink.com/link.asp?id=100312

Related research

Keywords: Celebrity endorsement; Event study; Stock returns;

References

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  1. Jonah Berger & Alan T. Sorensen & Scott J. Rasmussen, 2010. "Positive Effects of Negative Publicity: When Negative Reviews Increase Sales," Marketing Science, INFORMS, vol. 29(5), pages 815-827, 09-10.
  2. Pritamani, Mahesh & Singal, Vijay, 2001. "Return predictability following large price changes and information releases," Journal of Banking & Finance, Elsevier, vol. 25(4), pages 631-656, April.
  3. Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
  4. Haina Ding & Alexander Molchanov & Philip Stork, 2011. "The value of celebrity endorsements: A stock market perspective," Marketing Letters, Springer, vol. 22(2), pages 147-163, June.
  5. Michael Leeds, 2010. "Is bad news always bad? The impact of Floyd Landis's rise and fall on Phonak," Applied Economics Letters, Taylor & Francis Journals, vol. 17(8), pages 805-808.
  6. Matthew Hood, 2012. "The Tiger Woods scandal: a cautionary tale for event studies," Managerial Finance, Emerald Group Publishing, vol. 38(5), pages 543-558, May.
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