You might say that Tiger Woods paid more for sex than anyone in history.
Not only did the world’s No. 1 golfer’s string of sexual dalliances cost him tens of millions in endorsements and future advertising deals, but it might have cost shareholders of companies he endorsed up to $12 billion in losses, a new analysis concludes.
In a study released Monday, Victor Stango and Christopher Knittel, two economics professors at the University of California-Davis, quantified the damage that Woods’ sex scandal wreaked on one of the most powerful brands on the market.
"We estimate that shareholders of Tiger Woods' sponsors lost $5 billion to $12 billion after his car accident, relative to shareholders of firms that Mr. Woods does not endorse," the researchers wrote, adding that millions of shareholders were affected.
"Our analysis makes clear that while having a celebrity of Tiger Woods' stature as an endorser has undeniable upside, the downside risk is substantial, too," Stango, a professor at the UC Davis Graduate School of Management, said in a statement released along with the study.
Before Woods crashed his SUV in his Orlando-area neighborhood on Nov. 27, amid rumors of several extra-marital affairs, he was due to earn upwards of $100 million a year in endorsement money.
That all changed when he acknowledged stepping out on his wife of five years, Elin Nordegren, and announced that he would be taking an indefinite break from golf to work on his marriage.
Several major sponsors began distancing themselves from the world’s wealthiest athlete. Some immediately severed their deals, while others equivocated somewhat, saying they were reducing Woods’ visibility to allow him time to heal or pondering their future business relationship.
In reaching their conclusions, Stango and Knittel reviewed stock market returns for the two weeks following Woods’ Florida fender bender.
They examined the returns for such sponsors as Nike, Accenture, AT&T, Gatorade; TLC Laser Eye Centers and Gillette over that period, comparing them to those of both the total stock market and of each sponsor's closest competitor. They contrasted those findings against the returns for four years prior to accident to serve as a gauge.
Knittel and Stango found that, overall, the scandal diminished shareholder value in the sponsor companies by 2.3 percent, or about $12 billion.
The findings are statistically significant, they said.
"Our findings speak to a larger question of general interest in the business and academic communities: Does celebrity sponsorship have any impact on a firm's bottom line?" Stango and Knittel said.