Why Businesses Should React Quickly to Negative Publicity from Endorsers

An Economic Study Conducted by Freie Universität Berlin and the University of Connecticut. No 054/2019 from Mar 12, 2019 According to a study, the market value of a company can rise if it reacts quickly to negative publicity from a celebrity endorser. The study by Professor Sascha Raithel from Freie Universität Berlin and Professor Stefan J. Hock from the University of Connecticut shows that if a company responds to an endorser's gaffe within 72 hours, their market value can increase by 2.1% over the next four weeks of trading. However, a slower reaction time can lead to a loss of 1.9% over the same period. The professors examined how different reaction times to negative publicity affected companies' stock market value. They also analyzed how a company's response additionally affects their market value based on whether they further support the endorser or chastise the person for the behavior that generated bad publicity. The results of the study were published in Management Science .