Operational risk and reputation in the financial industry

Roland Gillet, Georges Hübner and Séverine Plunus

Journal of Banking & Finance, 2010, vol. 34, issue 1, 224-235

Abstract: By examining stock market reactions to the announcement of operational losses by financial companies, this paper attempts to disentangle operational losses from reputational damage. Our analysis deals with 154 events coming from the FIRST database of OpVantage. Events occurred between 1990 and 2004 in companies belonging to the financial sector and that are listed on the major European and US Stock Exchanges. Results show significant, negative abnormal returns at the announcement date of the loss, along with an increase in the volumes of trade. In cases of internal fraud, the loss in market value is greater that the operational loss amount announced, which is interpreted as a sign of reputational damage. Negative impact is proportionally greater when the loss amount represents a larger share in the company's net profit.

Keywords: Operational; risk; Reputational; risk; Event; study (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (53)

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Related works:
Working Paper: Operational risk and reputation in the financial industry (2010)
Working Paper: Operational risk and reputation in the financial industry (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:34:y:2010:i:1:p:224-235

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