12.04.2023
Is China Guilty of Category Fraud?
With movie awards season around the corner, some entertainment pundits may use the term “category fraud” to describe races in…
This week’s Chart of the Week examines the aftermath of three recent corporate scandals.
On August 15, 2015, The New York Times released an expose of the work environment at internet retail giant Amazon, describing a cut-throat work environment where employees were pushed to their limits. The company’s stock price sharply dropped in the weeks following the article, but has since recovered and continued to rise. Amazon’s buoyancy can be attributed to its established presence among consumers, lack of direct competitors, and the absence of legal/financial ramifications following the article.
On September 18, 2015, the Environmental Protection Agency (EPA) issued a Notice of Violation of the Clean Air Act to Volkswagen (VW) alleging that the automaker used software to deliberately evade clean air standards in certain diesel cars. The Department of Justice (DOJ) is suing VW for up to $46 billion, and the automaker must provide a solution for the nearly 600,000 cars affected by April 21, 2016. VW stock fell 65% immediately following the EPA announcement and has seen a feeble recovery since.
On September 28, 2015, legislators called for a subpoena of Wall Street favorite Valeant Pharmaceuticals in response to concerns about inflated drug prices. Shares immediately fell 16%, a trend that continued as investigators uncovered that Valeant’s serial acquisition strategy was buoyed by questionable accounting practices and unfounded price hikes. In the six months following, Valeant stock fell nearly 90% – from a high of $262 on August 5, 2015, to a low of $27 by March 18, 2016.
Investor Takeaway: Some companies are more resilient against reputational damage than others. Investors often do not have access to all the information, and seemingly profitable companies may stand on shaky foundations. It is important to distribute assets across many stocks to ensure that the reputational risk of any one firm cannot cause dramatic effects. In other words, holding diversified portfolios of securities can help insulate investors from the effects of single stock volatility emanating from corporate scandals.
12.04.2023
With movie awards season around the corner, some entertainment pundits may use the term “category fraud” to describe races in…
11.30.2023
The holiday spending frenzy is well underway as some of the biggest shopping days of the year, including Black Friday…
11.16.2023
October proved tumultuous for investors as all major U.S. equity indices were negative and the CBOE VIX Index, which serves…
11.08.2023
Earlier this year, the regional banking crisis and eventual collapses of Silicon Valley Bank, Signature Bank, First Republic Bank, and…
11.01.2023
U.S. equities declined for the third consecutive month in October amid an environment of higher yields and underwhelming earnings reports…
10.13.2023
This video is a recording of a live webinar held on October 26 by Marquette’s research team, featuring in-depth analysis…
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