When a Celebrity Endorser is Disgraced: A Twenty Five Year Event Study

Forthcoming, Marketing Letters

21 Pages Posted: 9 Feb 2013

See all articles by Sherry Bartz

Sherry Bartz

University of Miami

Alexander Molchanov

Massey University

Philip A. Stork

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute

Date Written: December 12, 2012


This paper investigates how the announcement of negative information about a celebrity endorser impacts firm value, as measured by abnormal stock returns. The unique data sample consists of 93 celebrity disgraces that occurred between 1986 and 2011, affecting firms listed on US stock exchanges. Some evidence is documented of negative and statistically significant abnormal returns around these events. Returns tend to be lower when the disgrace attracts much media attention, or when the celebrity itself is prominent. No significant returns are observed when a firm decides to terminate its endorsement contract with the disgraced celebrity. Congruent relationships between endorser and brand are less likely to be terminated, as well as endorsement contracts with prominent celebrities. The announcement day return itself appears to play no role in the firm’s decision whether to terminate or not.

Keywords: Celebrity Endorsement, Event Study, Stock Returns

Suggested Citation

Bartz, Sherry and Molchanov, Alexander and Stork, Philip A., When a Celebrity Endorser is Disgraced: A Twenty Five Year Event Study (December 12, 2012). Forthcoming, Marketing Letters, Available at SSRN: https://ssrn.com/abstract=2213518

Sherry Bartz

University of Miami ( email )

Coral Gables, FL 33124
United States

Alexander Molchanov

Massey University ( email )

New Zealand

Philip A. Stork (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS

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