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Strategic advertising in the aftermath of a corporate scandal

Author

Listed:
  • Ascensión Andina‐Díaz
  • Javier Campos
  • Juan‐Luis Jiménez
  • Jordi Perdiguero

Abstract

This paper contributes to the literature on how firms change their advertising strategies after a corporate scandal by providing both a theoretical model and an empirical evaluation based on the idea that advertising acts as a signal of the product quality that is modulated by the number of competing substitutes in the market. This result is new to the literature and helps to explain cases in which, possibly counter‐intuitively, a firm affected by a corporate scandal may optimally decide to reduce its advertising expenditures, rather than increase it, in an attempt to restore its reputation as quickly as possible. We find empirical support for this result in the Volkswagen Group's response to the Dieselgate scandal.

Suggested Citation

  • Ascensión Andina‐Díaz & Javier Campos & Juan‐Luis Jiménez & Jordi Perdiguero, 2024. "Strategic advertising in the aftermath of a corporate scandal," Manchester School, University of Manchester, vol. 92(6), pages 663-699, December.
    • Handle: RePEc:bla:manchs:v:92:y:2024:i:6:p:663-699
    DOI: 10.1111/manc.12492
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    References listed on IDEAS

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