Tiger woods, who fell from grace this month, today celebrates his 34th birthday amid scandal. In the meantime, a new study from UC Davis estimates Woods' scandal cost the shareholders and the economy 12 billion dollars.
The golfer's life took an unexpected turn since the discovery of his many infidelities. Thus, this year Tiger Woods' birthday will not be so happy. He disappointed so many people, not only from his family but also shareholders of sponsoring companies that one university study says cost them 12 billion dollars.
Two researchers Victor Stango and Christopher Knittel from the University of California, Davis, released a study on Monday where they show the economic negative effect of Tiger Woods' infidelity on the shareholder value of the companies that have sponsored Woods. The study, which is published on UC Davis' webiste, claims that the companies, endorsed by Tiger Woods, may have lost from 5 to 12 billion dollars after the car accident revealed the alleged extramarital affairs.
The loses are big because all of these endorsment companies are very large, publicly traded companies. The researchers conducted an event study, which led to their conclusions and are commonly used in economic and financial settings to measure company's stock performance in relation to an event.
"The 'event study' method that we employ measures losses relative to both the stock market as a whole and a set of competitor rms - in other words, relative to all rms that do not use Mr. Woods as an endorser. For example, we measure the losses for Nike shareholders considering both changes in the broader stock market, and changes in the value of Reebok," explain Stango and Knittel.
Researchers say that the losses that they measured "are distinct" from any personal financial losses suffered by Tiger Woods in the form of "lower current and future endorsement income." The finding also show that Woods' sports-related sponsors seem to su ffer more than his other sponsors.
These findings from the University of California researchers open an entirely new dimension of celebrity endorsements in product marketing. This is an area that may have not been well studied before by large companies and will be a source for future research to protect shareholders from celebrity transgressions and things that they do that may damage their own image.
“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 said. This analysis shows that celebrity endorsements, while have huge potential and great upside, they also have huge downside risk that the companies have ignored or not studied in the past.
Before the scandal, Woods earned about $100 million a year in endorsement income. Woods has earned more money per year than any athlete in the world per year.
Today Meredith Vieira and Matt Lauer from the Today Show also celebrate birthdays. We wish Tiger Woods and all of them a happy birthday.
Written by Armen Hareyan
HULIQ.com
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