Facing turbulences with organizational slacks in a corporate scandal: Firm value and risks
(R2020-85208)

AUTHORS

Dimitri Simonin, UTS Business School; Jan Hohberger, ESADE Business School

KEYWORDS

slacks; scandal; turbulence

ABSTRACT

Corporate scandals bring uncertainty to the firm, decreasing returns and increasing volatility. Our study aims to determine the buffering role of organizational slacks when a corporate scandal hits a firm, and their effect moderated by market turbulence. To measure it, we perform an event study analysis on a sample of 1,940 corporate scandals. Results show that organizational slacks decrease the negative impact of the corporate scandal on the firm and mitigate the negative effect when customer preferences actively change. We contribute to the marketing-finance interface literature and bring novel insights to managers on how to utilize organizational slacks efficiently.