Regulatory Sanctions and Reputational Damage in Financial Markets

36 Pages Posted: 16 Sep 2010 Last revised: 18 Dec 2015

John Armour

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

Colin Mayer

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

Andrea Polo

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics (Barcelona GSE); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

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; 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 )

Oriel College
Oxford, OX1 4EW
United Kingdom
+44 1865 286544 (Phone)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 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)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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

University of Oxford - Said Business School ( email )

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

Andrea Polo

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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