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Cultural norms and corporate fraud: Evidence from the Volkswagen scandal

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

Abstract

We examine a corporate governance role of local culture via its impact on consumer behavior following corporate scandals. Our proxy for culture is the presence of local Protestantism. Exploiting the unexpected nature of the Volkswagen (VW) diesel scandal in September 2015, we show that new registrations of VW cars decline significantly in German counties with a Protestant majority following the VW scandal. Further survey evidence shows that, compared to Catholics, Protestants respond significantly more negatively to fraud but not to environmental issues. Our findings suggest that the enforcement culture in Protestantism facilitates penalizing corporate fraud.

Suggested Citation

  • Hasan, Iftekhar & Noth, Felix & Tonzer, Lena, 2023. "Cultural norms and corporate fraud: Evidence from the Volkswagen scandal," Journal of Corporate Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:corfin:v:82:y:2023:i:c:s0929119923000925
    DOI: 10.1016/j.jcorpfin.2023.102443
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    More about this item

    Keywords

    Religion; Corporate scandal; Consumer choice; Protestantism;
    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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