Did Tiger Woods Really Destroy $12 Billion Worth of Shareholder Value?

Posted Dec 30th 2009 2:30PM by Zac Bissonnette
Filed under: Marketing and Advertising, Scandals

Every one in awhile -- and by every once in awhile I mean a few times per day -- some cynically ambitious researcher will come out with a "study" that taps into media interest in a hot topic, even if the research itself is completely lacking in rigor.

Such was the case when economists at the University of California, Davis announced that Tiger Woods' infidelity scandal has wiped out $12 billion worth of shareholder value at companies he endorses.

"Total shareholder losses may exceed several decades' worth of Tiger Woods' personal endorsement income," Victor Stango, a professor of economics at the UC Davis Graduate School of Management and co-author of the study, said in a statement.

How did they calculate that $12 billion figure? By looking at stock market returns at companies like Electronic Arts(ERTS), Nike(NKE), and Procter and Gamble(PG) over the 13-day period encompassing the news of the car crash and Woods' announcement that he was taking an indefinite leave from golf. They compared the performance of Woods-endorsed companies to competitors to arrive at the $12 billion loss figure.

The problem? It's just complete and utter garbage. There are simply way, way, way too many other factors to calculate "losses" related to Woods' marital infidelities. Does anyone honestly think that Woods' endorsement of some Gillette products is really enough to have a material impact on the market performance of a company the size of Procter and Gamble?

In all, this is just a stupid study rushed out to capitalize on popular interest in the Tiger Woods scandal. But I guess it worked, because we're talking about it: even if it's just to point out how dumb it is.

Tags: ERTS, nke, PG, Tiger Woods, TigerWoods