Basel Commitee for Banking Supervision and academic literature consider reputational risk as a secondary impact risk and operational risk as one of main sources of reputational risk. This paper assesses the reputational impact of announced operational losses for a sample of 163 listed financial companies from 1994 to 2008. Measurement of reputational losses is carried out using the event study methodology that allows one to estimate the stock price reaction to announcements of operational loss events. The results show that significant reputational losses occur following announcements of pure operational losses and that “fraud” is the event type that generates the most reputational damage. Instead, "trading and sales" and "payment and settlement" are business lines that determine the most crucial reputational losses
Does financial company reputation matter?
SOANA, MARIA GAIA;SCHWIZER, PAOLA GINA
2010
Abstract
Basel Commitee for Banking Supervision and academic literature consider reputational risk as a secondary impact risk and operational risk as one of main sources of reputational risk. This paper assesses the reputational impact of announced operational losses for a sample of 163 listed financial companies from 1994 to 2008. Measurement of reputational losses is carried out using the event study methodology that allows one to estimate the stock price reaction to announcements of operational loss events. The results show that significant reputational losses occur following announcements of pure operational losses and that “fraud” is the event type that generates the most reputational damage. Instead, "trading and sales" and "payment and settlement" are business lines that determine the most crucial reputational losses
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