On the Consequences on Listed Companies of Being Named in a Sanction
|Autor:|| Master in Macroecono Laure de Batz , |
|Typ:||IES Working Papers|
|ISSN / ISBN:|
|Klíčová slova:||Sanction, Financial Markets, Event Study, Regulation, Fraud, Information and Market Efficiency, Listed Companies|
|JEL kódy:||G14, G18, K42, N24|
|Abstrakt:||This paper examines stock market reactions to the four consecutive steps of the sanctions procedure, as conducted by the French Financial Market Authority (AMF), questioning the information content of such decisions through reactions from financial markets. This article contributes to answering whether, for a listed company, being named in a sanction, as an offender, an acquitted, or a victim of others’ financial market misconducts, conveys information to the market: do investors react to such news, and if so, at which stage of the procedure and to what extent?
The market reacts accordingly to the information content of the sanctions to some extent. Guilty companies experience significant abnormal negative returns after the sanction decision and its publication, to a limited extent. The markets also incorporate the informational content of the decision: no statistical abnormal reaction follows the publication of anonymized sanctions, market reactions vary depending on the regulatory breaches, and the severity of the decision influences abnormal returns to some extent. Settlements do not convey information to the market, being lighter and shorter procedure associated with lower sanctions. Being sentenced non-guilty implies a mixed correction in the market, depending on the step. Finally, companies named in a sanction report as victims of others’ financial misconducts suffer high negative abnormal returns after the sanction.