Caught red-handed: the cost of the Volkswagen Dieselgate

Abstract

Purpose With the investigation of the US stock market response to the Volkswagen Dieselgate, this paper aims to empirically demonstrate a case of dissemination of corporate scandals and events through industries and supply chains (i.e. inertial effect). Design/methodology/approach Individual event studies were conducted in the analysis of the market value fluctuations of 33 companies of the American automotive industry upon the disclosure of the scandal. Findings Results show that the fraud held by the German automaker spread to surrounding companies within the industry and supply chain levels of analysis, contaminating market values and costing around 6.44 billion dollars to American firms. Originality/value Building on the efficient market hypothesis and on the literature on supply chain management, empirical evidences support the conceptualization of the inertial effect as a valid rationale to address the dissemination of events through companies not directly involved. In that sense, the study contributes to an emerging and promising research field within the supply chain management literature. Beyond that, its interdisciplinary approach may inspire future research in the applicability of the event study methodology in similar contexts, as well as of alternative forms to empirically test other theoretical constructs.

The contagion effect of environmental violations: The case of Dieselgate in Germany

“…Corporate misconduct meant to obtain a competitive advantage over industry peers can be attributed to this notion (Carson, 2003). Industry peers' inability to replicate the emission values of VW diesel vehicles helped VW to penetrate the US market aggressively and to become one of its leading diesel vehicle vendors (Barrett et al, 2015;Fracarolli Nunes & Lee Park, 2016).…”

“…Corporate misconduct meant to obtain a competitive advantage over industry peers can be attributed to this notion (Carson, 2003). Industry peers' inability to replicate the emission values of VW diesel vehicles helped VW to penetrate the US market aggressively and to become one of its leading diesel vehicle vendors (Barrett et al, 2015; Fracarolli Nunes & Lee Park, 2016). The embedded quest for aggressive growth within the corporate culture, in line VW's strategy to become the leading automotive firm (Armstrong, 2017), exhibits clear characteristics of shareholder primacy, a corporate maxim well discussed by law scholars (Lee, 2005; Smith, 1998).…”

“…Customers had to deal with the issue of resolving the cheating software as well as with the decreased market value of their vehicles (Markowitz, Chapman, Guckian, & Lickel, 2017). Suppliers and retailers faced reduced popularity of diesel engines, which negatively affected their sales figures (Fracarolli Nunes & Lee Park, 2016). Employees had to worry about their jobs for the same reason (Müssgens & Peitsmeier, 2016).…”

“…Existing studies explain very well the negative stock returns for VW, as well as a negative spillover (contagion) effect on industry peers and suppliers around the initial EPA announcement (Barth, Eckert, Gatzert, & Scholz, 2017;Fracarolli Nunes & Lee Park, 2016;Griffin & Lont, 2018;Wood, Wang, Duong, Reiners, & Smith, 2018).…”

Absorptive capacity and relationship learning mechanisms as complementary drivers of green innovation performance

“…As green innovations dynamics may vary deeply from one industry to the other (Oltra and Jean, 2009) and from country to country (Horbach et al, 2013), this research work focuses on the automotive components manufacturing sector (ACMS) in Spain. Considering for the impact on the environment in terms of air pollution and resource and energy usage, firms in this industry are increasingly scrutinized from stakeholders at large for their environmental performance (Shatouri et al, 2013), as emerged in the 'dieselgate' that involved Volkswagen (Fracarolli & Lee, 2016). In this context, the development of more efficient and sustainable products or services is particularly relevant and case study analyzes support that the absorptive capacity of companies support diversified green innovation approach (Williander, 2007).…”