Spillover Effects from the Volkswagen Emissions Scandal: A Comprehensive Analysis of Stock, Corporate Bond, and Credit Default Swap Markets

Abstract

The Volkswagen emissions scandal is by far the largest case of emissions cheating in automotive history and had wide-reaching consequences for the industry throughout the world. This study examines the spillover effects to competitors and suppliers following Volkswagen’s public admission of manipulating their diesel engines to cheat regulatory emission tests. We analyze stocks, bonds, and credit default swaps beyond the usually measured losses in equity market value only. Our findings indicate negative spillover effects for competitors and suppliers worldwide. Distinguishing between European and non-European firms, we find negative spillover for European firms whereas non-European firms partly show positive (but mostly insignificant) effects. Our findings emphasize that both the equity and debt of a firm should be considered when estimating firm value losses due to spillover effects.