Tiger scandal costs shareholders $12bn

THE sex scandal that engulfed Tiger Woods may have cost companies endorsed by the world’s No. 1 golfer up to $12 billion (€8.3bn) in losses, according to a study by two economics professors from the University of California.

The study, by researchers Victor Stango and Christopher Knittel, gave an estimate for damage to the market value of Woods’ main sponsors caused by revelations of alleged extramarital affairs. “We estimate that shareholders of Tiger Woods’ sponsors lost $5-12 billion after his car accident, relative to shareholders of firms that Mr Woods does not endorse,’’ the researchers wrote, adding that millions of shareholders were affected.

“Our analysis makes clear that while having a celebrity of Tiger Woods’ stature as an endorser has undeniable upside, the downside risk is substantial, too,’’ Stango said in a statement.

Woods has announced he would take an indefinite break from golf to save his marriage.

In their study, the two professors said they looked at stock market returns for the 13 trading days after November 27, the date of the car incident that ignited the Woods scandal.

They compared returns for Woods’ sponsors during this period to those of both the total stock market and of each sponsor’s closest competitor.

They also reviewed returns for four years before the car accident to build up a comparative picture of the sponsors’ market performance. & Overall, Knittel and Stango concluded that the scandal reduced shareholder value in the sponsor companies by 2.3%, or about $12bn (€8.3bn).

They called the results statistically significant and said the overall pattern of losses at the parent companies was unlikely to stem from ordinary day-to-day variation in their stock prices.

“Our findings speak to a larger question of general interest in the business and academic communities: Does celebrity sponsorship have any impact on a firm’s bottom line?” Stango and Knittel said in presenting the report.