Do financial markets react to regulatory sanctions? Evidence from France

Thierry Kirat and Amir Rezaee
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Amir Rezaee: ISG - Institut supérieur de gestion - Université de Tunis

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Abstract: The paper offers an empirical analysis of the effects of sanctions decided by the Financial Markets Authority (AMF) on the reputation of firms in France. Using an event study, we intend to show the impact of three events on the stock prices : opening of an investigation by the AMF ; issuance of a monetary sanction ; publication of the information about sanction a newspaper. The reputational impact issue raises the broader issue of understanding of financial regulation enforcement operates in concreto. We find a strong negative impact of the announcement of sanction in press on the firms' stock prices. We observe a reputational loss of the deferred firm following the disclosure of sanction in press. We observe also a weak decrease in stock prices when the firm has been notified of the opening of investigation on its misconducts, however we find no evidence on the impact of announcement of sanction directly to the firm on the stock prices. We carry out an OLS cross-section regression to assess the impact of the amount of sanction on the reputational loss of firm. The amount of monetary sanctions are too low, compared the market size of deferred companies, to influence stock prices and contribute in reputational loss.

Keywords: Finance regulation; Sanctions; Autorité des marchés financiers; Finances internationales (search for similar items in EconPapers)
Date: 2015-07
Note: View the original document on HAL open archive server: https://hal.science/hal-01520528v1
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Citations: View citations in EconPapers (1)

Published in SASE 27th Annual Conference : Inequality in the 21st Century, Jul 2015, Londres, United Kingdom. pp.25

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