Is all publicity actually good publicity in a viral era?

Abstract

In a time when a racist comment becomes viral in seconds, John Schnatter (founder and former CEO of Papa John’s) created a crisis for his brand that changed the outlook of Papa John’s forever. In 2017, Papa John’s stock price decreased by roughly 34% as a direct result of two comments made by Schnatter: (1) a racist comment via a conference call with a marketing agency and (2) a comment during the company’s earnings conference call blaming the NFL for decreased pizza sales on their handling of their players’ National Anthem protests. John Schnatter’s lack of discernment and rash speech demonstrates that one moment can erode the foundations of a nationwide brand in minutes. As Papa John’s fights the backlash from their representative’s comments, we need empirical evidence for the extent of the damage. Beyond spending $19.5 million on legal and professional fees, we attempt to quantify loss of company value based on investor reactions to three events to help quantify the extent of financial repercussions. We examined a five-day change in market capitalization when John Schnatter blamed poor sales on NFL, his stepdown as CEO, and his viral comment from 2017. Our research provides evidence that a single lapse of judgement not only tarnished the reputations of executives but also damaged the overall market value of the company represented.