Graduation Year


Date of Submission


Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts



Reader 1

Lisa K. Meulbroek

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This analysis utilizes a unique and comprehensive dataset of public companies that have undergone a CEO removal for cause of ethics failure to analyze the effect of ethics failure on the value of the company. Using a multiple regression analysis, I find that the day of a CEO dismissal or resignation due to ethical cause results in an average value destruction of -3.75%. Furthermore, I find that competitor firms have positive and significant CARs for the window (0,3), suggesting that capital flows away from the ethics violators and into their competitors in industry. However, this CAR is eliminated soon after, illustrating that there does not exist a “halo effect” for these firms. No consistent price drift is found in the absence of news, providing further evidence for market’s efficiency concerning ethics related announcements. In sum, there exists no evidence for a positive alpha trading strategy exploiting any inefficiency related to ethics.

This thesis is restricted to the Claremont Colleges current faculty, students, and staff.