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Study: Tiger's scandal nuked up to $12 billion in shareholder value

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The Tiger Woods scandal nuked $5 billion to $12 billion in shareholder value, according to researchers at the University of California, Davis.

If you're a shareholder of Nike, Pepsi, which owns Gatorade, and other sponsors of Tiger Woods you're likely to be in the camp of folks bitter about his extramarital liaisons. Why? The Tiger Woods scandal nuked $5 billion to $12 billion in shareholder value, according to researchers at the University of California, Davis.

Victor Stango and Christopher Knittel, two profs at the UC Davis Graduate School of Management, examined stock market returns for the 13 trading days since the Woods scandal broke Nov. 27.

The stocks, which were compared to returns for the four years before the car accident, included:

  • Accenture;
  • American Express;
  • AT&T Tiger Woods PGA Tour Golf (Electronic Arts);
  • Gillette (Proctor and Gamble);
  • Nike;
  • Gatorade (PepsiCo);
  • TLC Laser Eye Centers;
  • and Golf Digest (News Corp.).

Investors in sports-related stocks saw the biggest drop 4.3 percent compared to 2.3 percent for the overall group. Accenture had no ill effects.

In the study, researchers note:

While most media discussions of the economic impact of these events have focused on Mr. Woods' diminished earning prospects, our estimates suggest that the losses incurred by sponsors' shareholders are at least as great as those sustained by Mr. Woods, and may be much greater. The upper range of our shareholder loss estimates far exceeds the lifetime income that Mr. Woods could expect if one projects his 2009 endorsement income over the next few decades. The total economic losses to society from these events - the sum of Mr. Woods' losses and the losses to shareholders - could easily exceed several billion dollars.

The results are a bit noisy, but researchers say the Woods effect can't be explained by the usual fluctuation.

Finally, we should caution that our estimates are statistically `noisy,' in that they could be significantly higher or lower than the numbers we report. One must make that caveat in any statistical study like this, and in our case the statistical margin of error is particularly large in part because Mr. Woods' sponsors are (with the exception of Nike and EA) subsidiaries of larger parent companies.

The money chart:

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Larry Dignan

Editor-in-Chief

Editor-in-Chief Larry Dignan is editor-in-chief of SmartPlanet and ZDNet. He is also editorial director of TechRepublic. Previously, he was an editor at eWeek, Baseline and CNET News. He has written for WallStreetWeek.com, Inter@ctive Week, New York Times and Financial Planning. He holds degrees from the Columbia University Graduate School of Journalism and the University of Delaware. He is based in New York but resides in Pennsylvania. Follow him on Twitter. Disclosure