Article (Scientific journals)
Reputational damage of operational loss on the bond market: Evidence from the financial industry
Plunus, Séverine; Gillet, Roland; Hübner, Georges
2012In International Review of Financial Analysis, 24, p. 66-73
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Keywords :
Operational risk; Reputational risk; Corporate bonds
Abstract :
[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.
Disciplines :
Finance
Author, co-author :
Plunus, Séverine ;  Université de Liège - ULiège > HEC-Ecole de gestion > HEC-Ecole de gestion
Gillet, Roland;  University Paris 1 Panthéon-Sorbonne, France > PRISM and Labex Refi
Hübner, Georges  ;  Université de Liège - ULiège > HEC-Ecole de gestion : UER > Gestion financière
Language :
English
Title :
Reputational damage of operational loss on the bond market: Evidence from the financial industry
Publication date :
September 2012
Journal title :
International Review of Financial Analysis
ISSN :
1057-5219
eISSN :
1873-8079
Publisher :
Elsevier Science
Volume :
24
Pages :
66-73
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBi :
since 02 December 2012

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