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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 investigate whether cultural norms shaped by religion drive consumer decisions after a corporate scandal. We exploit the notice of violation by the US Environmental Protection Agency in September 2015 accusing Volkswagen (VW) of using software to manipulate car emission values during test phases. We show that new registrations of VW cars decline significantly in German counties with a high share of Protestants following the VW scandal. Our findings document that the enforcement culture in Protestantism facilitates penalising corporate fraud. We corroborate this channel with a survey documenting that Protestants respond significantly different to fraud but not to environmental issues.

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  • Hasan, Iftekhar & Noth, Felix & Tonzer, Lena, 2020. "Cultural norms and corporate fraud: Evidence from the Volkswagen scandal," IWH Discussion Papers 24/2020, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:242020
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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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