Reference : Reputational damage of operational loss on the bond market: Evidence from the financial ...
Scientific journals : Article
Business & economic sciences : Finance
http://hdl.handle.net/2268/135698
Reputational damage of operational loss on the bond market: Evidence from the financial industry
English
Plunus, Séverine mailto [Université de Liège - ULg > HEC-Ecole de gestion de l'ULg > HEC-Ecole de gestion de l'ULg >]
Gillet, Roland [University Paris 1 Panthéon-Sorbonne, France > PRISM and Labex Refi > > >]
Hübner, Georges mailto [Université de Liège - ULg > HEC-Ecole de gestion de l'ULg : UER > Gestion financière >]
Sep-2012
International Review of Financial Analysis
Elsevier Science
24
66-73
Yes (verified by ORBi)
International
1057-5219
[en] Operational risk ; Reputational risk ; Corporate bonds
[en] We examine bond market reactions to the announcement of operational losses by financial companies. Thanks to the fact the corporate debt is senior to equity, we interpret the cumulated abnormal returns on the bond market of the companies having suffered those losses as a pure reputational impact of operational loss announcements. For a given operational loss, bond returns might be affected at up to three different periods: at the first press release date, when the company recognizes the loss itself and at the settlement date. These impacts hold stronger than for common stocks. We also study the effect of investors' knowledge of the loss amount, and show that the type of operational event and the proportion of the loss in the firm's market value influence the effect of the loss announcement. Cross-sectional analysis indicates that the abnormal return is mostly affected by market-based characteristics for the first press release date, while firm-related characteristics largely affect bond returns upon loss recognition.
Researchers ; Professionals
http://hdl.handle.net/2268/135698
10.1016/j.irfa.2012.07.007

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