This paper analyzes the impact that a scandal has on its company’s stock price. Scandals of various sizes and severities occur very often and it always impacts the performance of the company's stock. The impacts can have serious economic consequences for shareholders. This paper studies 30 companies that have endured a scandal in the last twenty years and compares their stock performance before and after the scandal to a company with a clean history. There are also thirty comparison companies that have not had a scandal, that are used to more effectively show that impact of a scandal. Therefore, the study is in the spirit of a difference-in-differences analysis. For the sake of this paper, a scandal is defined as an unlawful act by the company or employees of the company. The results show that a on average a scandal remains significant in terms of negatively impacting the company’s stock price for up to five days after the scandal occurs.
JEL Codes: G1 and G3