The Examination Of The Volkswagen Emission Scandal's Impact On The Stock Price Movements

Abstract

In this study, the price movements of Volkswagen Company's shares traded in Deutscher Aktienindex (DAX) have been studied on the course of before, after and the emergence of the Volkswagen emission scandal. In addition to analysis of price movements of the Volkswagen company, Dogus Automotive's, makes Volkswagen Company's distributor in Turkey, shares traded in the Turkish National Index have been analyzed. In the study, the price movements of the Volkswagen and Dogus Automotive stocks have been examined by using case study methodology in the process of emission scandal. In the case study method, the event window consists of the preevent and post-event 20 business days together with the event day. To estimate the ordinary returns of the Volkswagen's and Dogus Automotive's shares, the market model has been utilized. The data used in the market model consist of 5 years, from January 2010 to May 2015 when emission scandal obviously publicized, daily closing price. The significance of the differences between estimated returns and realized returns, in other words, abnormal returns have been tested by using t-statistics. As a result, the process of the Volkswagen emission scandal shows that investors reflect the bad news announcements, potential financial distress such as compensation obligations, in other words, developments that will put the company in trouble to stock prices.