Regulatory Sanctions and Reputational Damage in Financial Markets

42 Pages Posted: 16 Sep 2010 Last revised: 6 Dec 2018

See all articles by John Armour

John Armour

University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Colin Mayer

University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Andrea Polo

Luiss Guido Carli University - Department of Economics and Finance; Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

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Date Written: October 2, 2015

Abstract

We study the impact of the enforcement of financial regulation by the UK’s regulatory authorities on the market price of penalized firms. Existing studies rely on analyses of multiple events that may distort the measurement of reputational losses. In the UK, the entire enforcement process involves only one public announcement and is accompanied by complete information on legal penalties. We find that reputational losses are nearly nine times the size of fines, and are associated with misconduct harming customers or investors, but not third parties.

Keywords: Regulation, Reputation, Enforcement, Corporate Law, Financial Regulation

JEL Classification: G28, G38, K22, K42, L51

Suggested Citation

Armour, John and Mayer, Colin and Polo, Andrea, Regulatory Sanctions and Reputational Damage in Financial Markets (October 2, 2015). Oxford Legal Studies Research Paper No. 62/2010, European Corporate Governance Institute (ECGI) - Finance Working Paper No. 300/2010, Available at SSRN: https://ssrn.com/abstract=1678028 or http://dx.doi.org/10.2139/ssrn.1678028

John Armour (Contact Author)

University of Oxford - Faculty of Law ( email )

St Cross Building
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+44 1865 281616 (Phone)

HOME PAGE: http://www.law.ox.ac.uk/people/john-armour

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Colin Mayer

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 1865 288112 (Phone)
+44 1865 288805 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Andrea Polo

Luiss Guido Carli University - Department of Economics and Finance ( email )

Via Kennedy 6
Parma, 43100 - I
Italy

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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