Firms and Collective Reputation: A Study of the Volkswagen Emissions Scandal

48 Pages Posted: 2 Aug 2019 Last revised: 13 May 2022

See all articles by Rüdiger Bachmann

Rüdiger Bachmann

University of Notre Dame

Gabriel Ehrlich

University of Michigan at Ann Arbor

Ying Fan

University of Michigan

Dimitrije Ruzic

INSEAD

Date Written: July 2019

Abstract

This paper uses the 2015 Volkswagen (VW) emissions scandal as a natural experiment to provide evidence that collective reputation externalities are economically significant. Using a combination of difference-in-differences and demand estimation approaches, we document a spillover effect from the scandal to the non-VW German auto manufacturers. The spillover amounts to an average drop of $2,057 in consumer valuations of these manufacturers’ vehicles and to a 34.6% reduction in their annual sales. We substantiate our interpretation that the estimates reflect a reputation spillover using data on internet search behavior and direct measures of consumer sentiment from Twitter.

Suggested Citation

Bachmann, Rüdiger and Ehrlich, Gabriel and Fan, Ying and Ruzic, Dimitrije, Firms and Collective Reputation: A Study of the Volkswagen Emissions Scandal (July 2019). NBER Working Paper No. w26117, Available at SSRN: https://ssrn.com/abstract=3428169

Rüdiger Bachmann (Contact Author)

University of Notre Dame ( email )

3026 Nanovic Hall
Notre Dame, IN 46556
United States

Gabriel Ehrlich

University of Michigan at Ann Arbor ( email )

110 Tappan Hall
855 S. University Ave
Ann Arbor, MI 48109
United States

Ying Fan

University of Michigan ( email )

611 Tappan Street
Lorch Hall, Rm 308
Ann Arbor, MI 48109-1220
United States

HOME PAGE: http://www-personal.umich.edu/~yingfan/

Dimitrije Ruzic

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

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