Does our fashion-forward first lady affect the value of firms whose clothes she wears or ignores? Yes, says NYU professor David Yermack in his latest working paper “?The Michelle Markup: The First Lady’s Impact on Stock Prices of Fashion Companies.” It appears, however, that the effect is entirely redistributive: fashion companies that do not appeal to the first lady lose what the others gain. I am awaiting the working paper that evaluates whether campaign contributions of fashion companies affect wardrobe choices. The abstract is below:
I analyze changes in apparel company stock prices when Michelle Obama wears designer outfits at major events. The First Lady’s selections can create value exceeding $100 million for companies that design and market her clothing. The effect is approximately $2.3 billion during a 2009 European trip that the media labeled a “fashion faceoff” with her French counterpart Carla Bruni. However, firms whose clothing she chooses not to wear see their stock prices drop, and her net impact upon the industry amounts to a redistribution of value among firms. The First Lady’s influence on fashion firms represents a private benefit of public office, similar to private benefits of control obtained by corporate managers.
h/t National Affairs