Can Old Sin Make New Shame? Stock Market Reactions to the Release of Movies Re-Exposing Past Corporate Scandals

60 Pages Posted: 4 Oct 2022

See all articles by Han Jiang

Han Jiang

Tulane University - A.B. Freeman School of Business; The Chinese University of Hong Kong, Shenzhen - School of Management and Economics

Le (Lexi) Kang

Northwest University - School of Economics and Management

Ziye Zoe Nie

Fairleigh Dickinson University

Hui Zhou

Tulane University - A.B. Freeman School of Business

Date Written: May 1, 2022

Abstract

We study stock market reactions to the release of movies re-exposing past publicly known corporate scandals. Using a sample of 54 event firms featured in 23 movies, we find event firms have significantly negative and persistent abnormal returns to movie releases. We posit that such negative reactions are associated with the adverse public perception of event firms induced by scandal re-exposing movies. Consistent with this hypothesis, we find more pronounced negative abnormal returns for firms featured in more popular movies. Moreover, event firms experience downward earnings forecast revisions and increased implied costs of capital following movie releases.

Keywords: Event Study, Corporate Scandals, Media, Stale Information, Cost of Capital

JEL Classification: G12, G14, G41

Suggested Citation

Jiang, Han and Kang, Le and Nie, Ziye and Zhou, Hui, Can Old Sin Make New Shame? Stock Market Reactions to the Release of Movies Re-Exposing Past Corporate Scandals (May 1, 2022). Available at SSRN: https://ssrn.com/abstract=3884269 or http://dx.doi.org/10.2139/ssrn.3884269

Han Jiang

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

Le Kang (Contact Author)

Northwest University - School of Economics and Management ( email )

Xian, Shaanxi 029
China

Ziye Nie

Fairleigh Dickinson University ( email )

1000 River Rd
Teaneck, NJ 07666
United States

Hui Zhou

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States
70118 (Fax)

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