Reputational Losses and Operational Risk in Banking

Posted: 10 Mar 2011

See all articles by Franco Fiordelisi

Franco Fiordelisi

University of Essex - Essex Business School; University of Rome III, Italy

Paola Schwizer

University of Parma

Maria-Gaia Soana

University of Parma

Date Written: March 9, 2011

Abstract

Reputation is a key asset for any company whose affairs are based on trust like banks. Despite its importance, the number of studies dealing with reputational risk in financial industry is still limited. We estimate the reputational impact of announced operational losses for a large sample of financial companies in Europe and in the U.S. between 1994 and 2008. By running an event study, we show that substantial reputational losses occur following announcements of “pure” operational losses. We provide evidence that “fraud” is the event type that generates the most reputational damage. “Trading and sales" and “payment and settlement” are the two business lines determining crucial reputational losses. We also find that reputational losses are higher in Europe than in North America.

Suggested Citation

Fiordelisi, Franco and Schwizer, Paola and Soana, Maria-Gaia, Reputational Losses and Operational Risk in Banking (March 9, 2011). Available at SSRN: https://ssrn.com/abstract=1782247 or http://dx.doi.org/10.2139/ssrn.1782247

Franco Fiordelisi (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

University of Rome III, Italy ( email )

Via Silvio D'amico, 77
Rome, Rome 00145
Italy

HOME PAGE: http://host.uniroma3.it/docenti/fiordelisi/?home

Paola Schwizer

University of Parma ( email )

Via J.F. Kennedy 6
Parma, 43100
Italy

Maria-Gaia Soana

University of Parma ( email )

Via Kennedy 6
Parma, 43100
Italy

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
2,123
PlumX Metrics