No one knew Tiger Woods was a sex machine. Hence, the emergence of his extramatrimonial adventures has caused much damage, and not only to his own personal wealth. A new event study by Christopher R. Knittel and Victor Stango of UC Davis estimates that in the days following Tiger Woods’ car accident, shareholders of companies that Mr. Woods endorses lost as much as $12 billion in wealth. These losts are measured relative to both the entire stock market and a set of competitor firms. His top five sponsors (Accenture, Nike, Gillette, Electronic Arts and Gatorade) lost 2-3% of their aggregate market value after the accident, and his core sports-related sponsors EA, Nike and PepsiCo (Gatorade) lost over 4%.
Now, as celebrity scandals seem to have become the cornerstone of American news as popular figures like Tiger Woods fall from grace amid intense media coverage of their transgressions, DeWitt Stern, a highly renowned risk management and insurance brokerage firm, is launching a new insurance product to stop companies from taking a financial hit if their high-profile spokesperson becomes embroiled in scandal. The Reputation Risk Insurance is likely to be available in the first quarter of 2010.