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Thou shalt not bear false witness against your customers: Cultural norms and the Volkswagen scandal

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  • Hasan, Iftekhar
  • Noth, Felix
  • Tonzer, Lena

Abstract

This paper investigates whether cultural norms shaped by religion drive consumer decisions after a corporate scandal. We exploit the unexpected notice of violation by the US Environmental Protection Agency in September 2015, accusing the car producer Volkswagen (VW) to have used software to manipulate car emission values during test phases. Using a difference-in-difference model, we show that new registrations of VW (diesel) cars decline significantly in German counties with a high share of Protestants following the VW scandal. Our results suggest that the enforcement culture rooted in Protestantism affects consumer decisions and penalises corporate fraud.

Suggested Citation

  • Hasan, Iftekhar & Noth, Felix & Tonzer, Lena, 2019. "Thou shalt not bear false witness against your customers: Cultural norms and the Volkswagen scandal," IWH Discussion Papers 21/2019, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:212019
    Note: A revised version of this paper has been published as Hasan, Iftekhar; Noth, Felix; Tonzer, Lena: Cultural Norms and Corporate Fraud: Evidence from the Volkswagen Scandal. IWH Discussion Paper 24/2020. Halle (Saale) 2020: http://hdl.handle.net/10419/226484
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    More about this item

    Keywords

    religion; corporate scandal; consumer choice; climate change;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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