Regulatory Sanctions and Reputational Damage in Financial Markets
University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)
University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); University of Oxford - Said Business School
Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics (Barcelona GSE)
October 2, 2015
Oxford Legal Studies Research Paper No. 62/2010
ECGI - Finance Working Paper No. 300/2010
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.
Number of Pages in PDF File: 36
Keywords: Regulation, Reputation, Enforcement, Corporate Law, Financial Regulation
JEL Classification: G28, G38, K22, K42, L51
Date posted: September 16, 2010 ; Last revised: December 18, 2015
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