Bad News and Bank Performance during the 2008 Financial Crisis

29 Pages Posted: 24 Jul 2014

See all articles by Inga Chira

Inga Chira

California State University- Northridge

Date Written: July 20, 2014


The paper investigates market reaction to negative reports published by analysts and auditors for a sample of investment, commercial, and savings banks during the 2008 financial crisis and compares the results to non-crisis periods. The results show that during 2008, analysts' downgrades and underperformance reports resulted in stronger negative returns than during non-crisis periods and that investment banks experienced the worst stock price declines. The market reaction to auditors’ issues and going concern flags is different during the crisis as well. In non-crisis periods no reaction to auditors’ bad news is reported, while during the crisis there is a negative and significant reaction for investment banks only. Overall, the type of bank, investment versus commercial, significantly contributes to explaining the variability in returns during the financial crisis.

Keywords: Financial Crisis, Auditors, Analysts, Bank Performance

JEL Classification: G01, G21

Suggested Citation

Chira, Inga, Bad News and Bank Performance during the 2008 Financial Crisis (July 20, 2014). Applied Financial Economics, Vol. 24, No. 18, 2014. Available at SSRN:

Inga Chira (Contact Author)

California State University- Northridge ( email )

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