“‘Nike is concerned by the serious and highly disturbing allegations made against Michael Vick and we consider any cruelty to animals inhumane and abhorrent,’ the company said in a statement yesterday. Nike added that it believes Mr. Vick should be ‘afforded the same due process as any citizen’ and hadn’t yet terminated its relationship with the athlete at this time.”
Obviously Vick is not the first celebrity endorser to run into trouble with the law. As a rule the stock prices of the firm drops on the news. To show this a few years ago I helped on a paper with Mike Russell and Betsy Drewniak that sure enough showed that when celebrity endorsers got into trouble, the stock prices of the firm whose product is being endorsed, falls.
The delay of the shoe line is a good example of how cash flows are negatively affected when the celebrity gets into trouble or has a poor performance.