Cultural norms and corporate fraud: Evidence from the Volkswagen scandal

Do Lenders Price the Brown Factor in Car Loans? Evidence from Diesel Cars

“…Indeed, various events and reports in recent years have shown that diesel cars cause serious health and environmental problems, worsening the perception about the environmental performance of diesel cars. In particular, when the diesel emissions scandal has revealed the actual levels of pollution generated by diesel vehicles, car purchasers have been discouraged from buying the diesel cars of the affected brands, due to the negative effect of this fraud on consumer decisions, while developing concerns also for other brands due to collective reputation externalities (Bachmann et al, 2022;Hasan et al, 2023). Moreover, circulation restrictions limiting the possibility to use diesel cars in highly polluted urban areas may significantly reduce the willingness of consumers to purchase diesel cars and then negatively affect the collateral value of such vehicles in the resale market.…”

“…Hasan et al (2023) provide evidence on the heterogeneity in consumer decisions due to differences in enforcement culture. They find that new registrations of VW cars decline significantly in German counties with a high share of Protestants following the VW scandal, due to the negative effects of corporate fraud on consumer preferences.…”