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In just one commercial or advertisement, celebrities can become closely associated with products they endorse or become a spokesperson for.

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So it’s no surprise that when a celebrity’s reputation is shattered in the eyes of their fans, their reputation is not the only thing that takes a hit. The companies that the celebrity endorses can suffer by association. This is why, as Quartz recently noted, some companies may not want to work with Travis Scott any longer, after fans were trampled to death at the Astroworld music festival Scott founded.

Take the case of Tiger Woods’ whose reputation took a nosedive after his many affairs came to light in November 2009. At the time, Woods raked in around $100 million a year just in endorsements. His sponsors included major companies such as Gillette, Nike, and PepsiCo (Gatorade). While Nike and Gillette originally expressed their support for Woods, many brands distanced themselves from Woods in months following the scandal.

Economists Christopher R. Knittel and Victor Stango found that Woods’ portfolio of sponsors lost around 2 percent of their market value 10 to 15 trading days after the scandal. Brands associated with Woods, however, did not see long-term damage from the then-disgraced golfer.

This could be, in part, because many celebrities like Woods may only endorse one product or a line of products from a company, versus the brand as a whole. Woods was also not the sole athlete who was the face of Nike, Gillette, or Gatorade at the time.

“Nike’s stock price, of course, reflects expectations about its profits from all business lines,” Knittel and Stango explained. “So, the percentage change in profits will be weighted by the shares of economic profits flowing from ‘Tiger-related’ products and ‘non-Tiger-related’ products.’”

Sherry Bartz, Alexander Molchanov and Philip A. Stork, who found that “Woods-brand merchandise sales went up during the period of his public embarrassment,” offer another explanation. “The old adage that ‘any publicity is good publicity‘ still holds true.

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Management Science, Vol. 60, No. 1 (January 2014), pp. 21-37 (17 pages)
Marketing Letters, Vol. 24, No. 2 (June 2013), pp. 131-141 (11 pages)