Regulatory Sanctions and Reputational Damage in Financial Markets

Regulatory Sanctions and Reputational Damage in Financial Markets

John Armour, Colin Mayer, Andrea Polo

Series number :

Serial Number: 
300/2010

Date posted :

November 01 2010

Last revised :

December 06 2018
SSRN Share

Keywords

  • regulation • 
  • Reputation • 
  • enforcement • 
  • corporate law

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.

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Authors

Professor
Real name:
Colin Mayer
Fellow, Research Member, Board Member
Saïd Business School, University of Oxford
Dr.
Real name:
Andrea Polo
Research Member
Luiss University, Universitat Pompeu Fabra, EIEF and Barcelona GSE