SCANDALS that have engulfed the likes of Tesco and the big banks might be assumed to be bad for business.

But the opposite could be true, according to a new study by the University of Sussex.

Scandals involving the bosses of major firms have no long-term negative impact on share prices – and can even lead to better performance, researchers found.

Corrective measures put in place after a scandal led to an improved operating performance, often outstripping that of scandal-free rivals.

But short-term consequences for shareholders were dire and chief executives committing fraud or insider trading cost shareholders dearly in the days following the news of the scandals.

In the study of 80 corporate scandals in the USA, share prices plummeted between 6.5% and 9.5% in the month after the misconduct was made public, collectively costing shareholders an average of £1.25 billion per scandal-hit firm.

And it is not just limited to financial misdemeanours. Personal scandals such as having an affair, lies on CVs and harassment cases had just as much impact.

However, the negative effects did not last long. Three years on, the share-price performance of the same firms matched those that had not been affected by scandals.

If anything, the 80 companies in the study – including Apple, Hewlett Packard, IBM, JP Morgan and Yahoo – actually showed an improved operating performance in the years after a scandal.

University of Sussex economist Dr Surendranath Jory led the research, published in the journal of Applied Economics.

He said: “Corporate scandals can act as a catalyst to implement changes that benefit investors. The companies put in place safeguards to protect against future abuses, and they seem to work.”

But Dr Jory was surprised by the suddenness of the initial fall in share price.

He added: “I thought that noise of corporate misdeeds would have leaked prior to official announcements and that investors would have already priced in the negative consequences of those crimes days before the announcements.

“But it seems that investors wait for something more tangible before reacting – for instance, an announcement in the media.”

Dr Jory is a lecturer in finance within the school of business, management and economics at the University of Sussex.