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The impact of corporate crisis on stock performance: Evidence of an event study exemplified by the Volkswagen diesel engine crisis
Jönköping University, Jönköping International Business School, JIBS, Business Administration.
Jönköping University, Jönköping International Business School, JIBS, Business Administration.
2016 (English)Independent thesis Advanced level (degree of Master (One Year)), 60 credits / 90 HE creditsStudent thesis
Abstract [en]

The diesel engine scandal of the carmaker Volkswagen let the company’s stock collapse, losing almost a quarter of its market value within a few days. The United States Environmental Protection Agency issued a ‘Violation of Notice’ of the ‘Clean Air Act’ to the German car manufacturer, accusing the corporation to have cheated on American exhaust standards by the use of a defeat device. Crises such as the underlying case cause big reputational and thus financial damage to a company, which can be measured by event studies. First, we analyze the impact of the damaging event on Volkswagen, second we investigate potential spillover effects on benchmarks. Third, we focus on the investigation of sub-events to capture full effects of the scandal during the post-crisis period. We are interested in analyzing sub-events to understand their impact on the stock price recovery. In general, we test the hypothesis of a damaging event having no impact on the stock performance against the alternative hypothesis. We find that global benchmarks are little or not affected, while we find significant impact on Volkswagen, the Volkswagen Group and the European automobile industry. Negative follow up announcements tend to have no significant impact in the long but in the short-run, while positive follow up news show significant impact on the stock price at any time during the considered post-crisis period. Conventional event studies deal with samples, while we examine a single time series. We adapt the methodology accordingly, thus we present a new approach that solves the issue of moving event windows and overlapping event windows.

Place, publisher, year, edition, pages
2016.
Keyword [en]
Event study, Crisis Management, Volkswagen, Single time series
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-30714ISRN: JU-IHH-FÖA-2-20160267OAI: oai:DiVA.org:hj-30714DiVA: diva2:940507
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Available from: 2016-06-22 Created: 2016-06-21 Last updated: 2016-06-22Bibliographically approved

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