Naming and Shaming: Evidence from Event Studies

A firm’s ‘reputation’ reflects the expectations of its partners of the benefits of trading with it in the future. An announcement by a regulator that a firm has engaged in misconduct may be expected to impact negatively on trading parties’ (i.e. consumers or investors) expectations for a firm’s future performance, and hence on its market value. How can we identify reputational losses from share price reactions? How large are these losses for different type of misconducts? The chapter seeks to answer the above questions in the light of recent empirical evidence and draws implications for regulatory enforcement policy.