A corporate CEO caught up in a scandal is generally seen a disaster for the company. However, our study claims otherwise. This is with reference to a co-authored paper that appeared in Applied Economics in January 2015:
We find that corporate scandals can actually act as a catalyst to implement changes that benefit investors. The evidence is based on data for corporate scandals between 1993 and 2011. What seems to explain the results is that the companies put in place safeguards to protect against any future abuse.
So, a point of respite that emerges for investors is the damage due to a scandal linked to their CEOs may only be confined to the short run!