Brandon N. Cline, Ralph A. Walkling, Adam S. Yore
The Consequences of Managerial Indiscretions:
Sex, Lies, and Firm Value (2018)
, Main Idea
Personal misconduct of top executives (such as sexual scandals, dishonesty, violence, or drug abuse), even when it is not
directly related to the company’s business, can cause real economic damage to the rm.
The authors argue that:
• A manager’s personal reputation is an economic asset.
• When that reputation is damaged, the rm also suffers.
• The market interprets personal misconduct as a signal of low integrity.
• Lower perceived integrity reduces trust from investors, partners, and other stakeholders, which leads to a decline in
rm value.
So the central question of the paper is:
Do personal scandals of managers affect rm value?
fi
fifi fi
The Consequences of Managerial Indiscretions:
Sex, Lies, and Firm Value (2018)
, Main Idea
Personal misconduct of top executives (such as sexual scandals, dishonesty, violence, or drug abuse), even when it is not
directly related to the company’s business, can cause real economic damage to the rm.
The authors argue that:
• A manager’s personal reputation is an economic asset.
• When that reputation is damaged, the rm also suffers.
• The market interprets personal misconduct as a signal of low integrity.
• Lower perceived integrity reduces trust from investors, partners, and other stakeholders, which leads to a decline in
rm value.
So the central question of the paper is:
Do personal scandals of managers affect rm value?
fi
fifi fi
