Reputational Risk in Bank and Finance

Abstract:     
Reputation is growing as a very important asset in everyday corporate life and it is even crucial for financial corporations. The main financial institutions consider reputation as one of the six risk factors to be managed by any corporation in financial sector: credit, market, operational, liquidity, legal and reputational risks. This paper deals with two standard ways academic literature has dealt with reputational risk: the multifactor model and the cumulative abnormal return. This paper’s aim is to go through both of them focusing their strengths and weaknesses and showing which kind of econometric tests have to be performed in order to check the robustness of the results.

Keywords: reputational risk, measurement risk

JEL Classification: G2, G21, L14

working papers series