Wells Fargo: An Examination of a Corporate Scandal and the Economic Impact on the Value of the Stock

Abstract

Throughout the past 20 years, there has been an uptick in corporate scandals (Harrison & Wicks, 2021). In light of recent scandals that are part of our daily news feed, there is an impetus to do more research on why and how executive leaders continue to perpetuate these misdeeds and what impact, if any, these scandals have on the overall financial status in relationship to the stock activity Wells Fargo (WFC) is one of the companies that was engulfed in massive scandal (Cavico & Mujtaba, 2017) and will be the main spotlight for this paper. This paper will highlight and draw parallels between WFC fake account scandal and the effects that this activity had on their stock activity before, during, and afterward. An in-depth analysis is needed to see if there are any correlations between how a power-house company, such as WFC falls from grace to greed, and what economic impact the shameful conduct has on the company’s stock prices. The theoretical analysis further seeks to investigate whether there is a causal relationship between corporate governance transgressions and the negative effects on large-scale stock performance. This paper will attempt to show how the market reacted to the predacious behavior of WFC.