- Tom Silva
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Tiger Woods’ Fall From Grace Drags Down His Sponsors’ Stocks
Tiger Woods’ extramarital escapades are costing shareholders in the companies he sponsors, according to a study by an economics professor at the University of California at Davis. Victor Stango found that the market value lost to firms that had Woods as a sponsor is already $12 billion. Woods is believed to earn approximately $100 million annually from corporate endorsements.
Stango and his team studied stock market returns for the 13 trading days between November 27 – the date of Woods’ late-night car crash – and December 17, a week after the golfer announced he was leaving the sport for an indefinite time. They compared the stocks to the total market and competing stocks. Next, they compared the stocks to the market as a whole and to competing stocks. They also studied the stocks over four years to determine how they have performed historically when compared to the market and to competitors. The bottom line? The scandal reduced shareholder value in the sponsor firms by 2.3 percent – or $12 billion.
“Total shareholder losses may exceed several decades’ worth of Tiger Woods’ personal endorsement income,” Stango noted. The sponsor firms include Accenture; American Express; AT&T; Tiger Woods PGA Tour Golf; Gillette; Nike; Gatorade; TLC Laser Eye Centers; and Golf Digest. “This pattern of losses is unlikely to stem from ordinary day-to-day variations in their stock prices.” The three sports-related companies (Tiger Woods PGA Golf Tour, Gatorade and Nike) performed the worst, experiencing a 4.3 percent scandal-related decline in their stock value – equaling approximately $6 billion.
According to the researchers, “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? Our analysis makes clear that while having a celebrity of Tiger Woods’ stature as an endorser has undeniable upside, the downside risk is substantial too.”